-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I2hogD3pldBQfJLLb7ke+CG6K8gjNbcGzxh5i00yudCXyAwqN3CJozOEQJ0kgsiE cBmfV4BGY/nl5TN1pod4zg== 0000950149-02-000421.txt : 20020415 0000950149-02-000421.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950149-02-000421 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020304 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCHWAB CHARLES FAMILY OF FUNDS CENTRAL INDEX KEY: 0000857156 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05954 FILM NUMBER: 02565710 BUSINESS ADDRESS: STREET 1: 101 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4156277000 MAIL ADDRESS: STREET 1: 101 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 N-30D 1 f78571n-30d.txt FORM N-30D FOR THE PERIOD END DATED 12/31/2001 SCHWAB MONEY FUNDS December 31, 2001 ANNUAL REPORT SCHWAB MONEY MARKET FUND SCHWAB GOVERNMENT MONEY FUND SCHWAB U.S. TREASURY MONEY FUND SCHWAB VALUE ADVANTAGE MONEY FUND(R) [CHARLES SCHWAB LOGO] [PHOTO OF CHARLES SCHWAB] Dear Shareholder, The events of September 11, 2001 will weigh on our minds for years to come. Amid the nation's uncertainties, a few things remain clear. We must continue to reach out and help the distressed, offer support, and take steps to rebuild and create the best possible future for generations to come. It's also clear that America remains strong, as do its institutions. While the nation's financial system has been deeply affected, the system's foundation is strong. The message for investors remains consistent: the basic rules of investing still apply. Just as in the past, a long-term strategy and a diversified portfolio are still the most important factors in pursuing your financial goals. By investing in SchwabFunds(R), you have already taken an important step in building a portfolio that can help you achieve your financial goals. Thank you for the trust you've placed in SchwabFunds. Sincerely, /s/ Charles Schwab - ------------------ Charles Schwab SCHWAB Money Funds ANNUAL REPORT January 1, 2001 - December 31, 2001 2 Market Overview 6 Schwab Money Market Fund 23 Schwab Government Money Fund 32 Schwab U.S. Treasury Money Fund 40 Schwab Value Advantage Money Fund(R) 57 Financial Notes 61 Fund Trustees --------------------------------------------------------------------- 64 HOW TO READ THIS REPORT An illustrated guide to the financials, along with a glossary. - -------------------------------------------------------------------------------- Subject to SEC approval, all SchwabFunds may soon be able to borrow from, and lend to, each other. This should allow the SchwabFunds to lower borrowing costs and earn more interest than they otherwise would. - -------------------------------------------------------------------------------- SchwabFunds(R) offers two basic types of money fund investments, each designed with a particular use in mind. SWEEP INVESTMENTS(TM) For your day-to-day cash needs A Sweep Investment can serve as the primary sweep money fund for your Schwab account. VALUE ADVANTAGE INVESTMENTS(R) For your larger, longer-term cash balances Higher balance requirements and policies designed to discourage frequent transactions make Value Advantage Investments appropriate for money you don't need to access frequently. While their features can help minimize fund expenses--which in turn can mean higher returns for investors--Value Advantage Investments cannot be used as sweep funds.
SWEEP VALUE ADVANTAGE INVESTMENTS INVESTMENTS TAXABLE MONEY FUNDS - --------------------------------------------------------------------------------- SCHWAB MONEY MARKET FUND o - --------------------------------------------------------------------------------- SCHWAB GOVERNMENT MONEY FUND o - --------------------------------------------------------------------------------- SCHWAB U.S. TREASURY MONEY FUND o - --------------------------------------------------------------------------------- SCHWAB VALUE ADVANTAGE MONEY FUND(R) o - --------------------------------------------------------------------------------- MUNICIPAL MONEY FUNDS - --------------------------------------------------------------------------------- SCHWAB MUNICIPAL MONEY FUND o o - --------------------------------------------------------------------------------- SCHWAB CALIFORNIA MUNICIPAL MONEY FUND o o - --------------------------------------------------------------------------------- SCHWAB FLORIDA MUNICIPAL MONEY FUND o - --------------------------------------------------------------------------------- SCHWAB NEW JERSEY MUNICIPAL MONEY FUND o - --------------------------------------------------------------------------------- SCHWAB NEW YORK MUNICIPAL MONEY FUND o o - --------------------------------------------------------------------------------- SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND o - ---------------------------------------------------------------------------------
For more complete information on SchwabFunds, including fees and expenses, call 800-435-4000 to obtain a prospectus or go to www.schwab.com/schwabfunds. Please read the prospectus carefully before investing. An investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although money funds seek to preserve the value of your investment at $1 per share, it is possible to lose money. MARKET OVERVIEW ECONOMY FLAGS, EVEN BEFORE 9/11; FED CUTS INTEREST RATES 11 TIMES. [PHOTO OF MAN AND WOMAN] After ten years of nearly nonstop growth, the U.S. economy fell into a recession in 2001. Although Gross Domestic Product (GDP) remained positive until the third quarter, the National Bureau of Economic Research, a widely recognized independent panel, later determined that the recession had begun as early as March. Stocks, which were already well below their all-time highs as the year began, continued to flounder, and, for the most part, ended 2001 down significantly. Responding to economic and market weakness, the Federal Reserve Board (the Fed) lowered interest rates aggressively throughout the year, reducing the benchmark Fed Funds Rate from 6.50% to 1.75%. Because the main effects of a rate cut typically are not felt until about six months later, it is not yet clear how much stimulus the most recent cuts will provide. In the meantime, the economy has had to contend not only with a recession but also with the costs and uncertainty resulting from the tragic events of September 11. ASSET CLASS PERFORMANCE COMPARISON % RETURNS DURING THE REPORTING PERIOD This graph compares the performance of various asset classes during the reporting period. [LINE GRAPH]
Lehman Aggregate MSCI EAFE Russell 2000 S&P 500 3-Mo Bond Index Index Index Index T-Bills 29-Dec-00 0 0 0 0 0 05-Jan-01 1.37 0.21 -4.21 -1.66 0.25 12-Jan-01 0.36 -1.5 0.49 -0.15 0.3 19-Jan-01 0.96 -0.67 0.99 1.69 0.4 26-Jan-01 0.88 -1.19 3.19 2.63 0.51 02-Feb-01 1.62 -0.95 3.7 2.29 0.61 09-Feb-01 1.73 -3.91 2.91 -0.34 0.7 16-Feb-01 1.46 -5.2 5.4 -1.35 0.8 23-Feb-01 1.62 -8.29 -1.09 -5.57 0.91 02-Mar-01 2.32 -8.06 -1.19 -6.33 1 09-Mar-01 2.6 -7.26 -1.83 -6.39 1.12 16-Mar-01 3.32 -14.35 -8.4 -12.68 1.23 23-Mar-01 3.34 -15.21 -8.07 -13.49 1.33 30-Mar-01 3.03 -13.52 -6.5 -11.85 1.43 06-Apr-01 3.41 -12.23 -9.77 -14.27 1.58 13-Apr-01 2.52 -10.58 -5.52 -10.09 1.63 20-Apr-01 2.51 -8.48 -3.08 -5.57 1.76 27-Apr-01 2.51 -7.89 0.54 -4.81 1.82 04-May-01 3.44 -6.91 2.43 -3.72 1.9 11-May-01 2.29 -8.18 1.32 -5.31 1.96 18-May-01 2.92 -7.92 5.28 -1.78 2.06 25-May-01 2.64 -8.85 5.79 -2.85 2.12 01-Jun-01 3.42 -11.26 4.38 -4.01 2.18 08-Jun-01 3.56 -10.98 6.47 -3.68 2.25 15-Jun-01 4.14 -13.73 3.07 -7.54 2.35 22-Jun-01 4.72 -14.38 1.74 -6.69 2.42 29-Jun-01 3.61 -14.63 6.86 -6.7 2.47 06-Jul-01 3.93 -17.72 0.58 -9.28 2.53 13-Jul-01 4.49 -17.21 2.09 -7.36 2.59 20-Jul-01 5.27 -17.47 1.7 -7.74 2.67 27-Jul-01 5.58 -17.64 1.12 -8.12 2.73 03-Aug-01 5.44 -15.18 1.58 -7.39 2.79 10-Aug-01 6.11 -17.18 -0.81 -9.23 2.87 17-Aug-01 6.6 -16.7 -0.75 -11.38 2.94 24-Aug-01 6.53 -15.66 0.34 -9.63 2.99 31-Aug-01 7.13 -18.37 -2.19 -13.4 3.05 07-Sep-01 7.28 -22.53 -7.05 -17.05 3.14 14-Sep-01 8.04 -27.41 -7.94 -16.54 3.16 21-Sep-01 7.71 -32.5 -20.84 -26.22 3.44 28-Sep-01 8.38 -26.7 -15.36 -20.4 3.48 05-Oct-01 8.97 -24.51 -13.22 -18.07 3.55 12-Oct-01 8.53 -23.52 -10.36 -16.52 3.58 19-Oct-01 9.05 -25.31 -10.95 -17.91 3.63 26-Oct-01 9.53 -22.92 -8.24 -15.53 3.68 02-Nov-01 10.19 -23.95 -9.37 -16.78 3.75 09-Nov-01 10.7 -22.32 -8.29 -14.24 3.82 16-Nov-01 8.43 -21.82 -5.5 -12.83 3.83 23-Nov-01 8.07 -22.13 -4 -11.95 3.85 30-Nov-01 9.13 -21.99 -3.48 -12.66 3.91 07-Dec-01 7.52 -20.78 0.83 -11.21 3.95 14-Dec-01 7.55 -23.67 -1.21 -13.91 3.97 21-Dec-01 8.02 -23.35 1.47 -12.24 4.02 28-Dec-01 8.3 -22.12 2.14 -11.97 4.04
These figures assume dividends and distributions were reinvested. Index figures don't include trading and management costs, which would lower performance. Indices are unmanaged and you can't invest in them directly. Remember that past performance isn't an indication of future results. Data source: Charles Schwab & Co., Inc. (Schwab). THREE-MONTH U.S. TREASURY BILLS (T-BILLS): measures short-term U.S. Treasury obligations LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market S&P 500(R) INDEX: measures U.S. large-cap stocks RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East 2 DOWNTURN IS WIDESPREAD; JOBLESS RATE UP FROM RECORD LOWS. [PHOTO OF MAN] After falling so low in 2000 that many feared the return of inflation, the U.S. unemployment rate began rising rapidly. By the end of the reporting period, it was at 5.8%, its highest level in over six years. Job losses have affected almost all industries, with manufacturing among the hardest hit. On a positive note, inflation has remained low. Employers have enjoyed strong worker productivity, which has helped stabilize labor costs and consumer prices. - -------------------------------------------------------------------------------- Although unemployment may continue to rise, it is not especially high by historical standards. - -------------------------------------------------------------------------------- RATE CUTS DRIVE YIELDS DOWN; STOCKS SLUMP, BOND PRICES RISE. The Fed's series of interest rate cuts during 2001 meant steady downward pressure on money market yields. In spite of this, money market funds remained popular with investors seeking alternatives with lower risk at a time when stock markets and the economy were retreating. In equity markets, the decline that began in the last quarter of 2000 continued throughout 2001. As many Internet start-ups began to downsize or go - -------------------------------------------------------------------------------- ECONOMIC FACTORS AND THEIR EFFECTS ON THESE FUNDS. The following charts show recent figures for several common measures of the state of the U.S. economy and the interest rate environment. While the relationship of each of these factors to the performance of the funds is complex, the captions over each chart and the discussion above include analysis of how we believe these factors may have influenced market behavior during the reporting period. REAL GDP GROWTH Annualized growth rate for each quarter shown Strong auto sales and government spending resulted in a surprising preliminary figure for Q4 2001 GDP of 0.2%. Traditionally, a recession is two negative quarters in a row, which could still occur if Q4 GDP is revised downward. [BAR CHART]
Q1 1992 3.8 Q2 1992 3.8 Q3 1992 3.1 Q4 1992 5.4 Q1 1993 -0.1 Q2 1993 2.5 Q3 1993 1.8 Q4 1993 6.2 Q1 1994 3.4 Q2 1994 5.7 Q3 1994 2.2 Q4 1994 5 Q1 1995 1.5 Q2 1995 0.8 Q3 1995 3.1 Q4 1995 3.2 Q1 1996 2.9 Q2 1996 6.8 Q3 1996 2 Q4 1996 4.6 Q1 1997 4.4 Q2 1997 5.9 Q3 1997 4.2 Q4 1997 2.8 Q1 1998 6.1 Q2 1998 2.2 Q3 1998 4.1 Q4 1998 6.7 Q1 1999 3.1 Q2 1999 1.7 Q3 1999 4.7 Q4 1999 8.3 Q1 2000 2.3 Q2 2000 5.7 Q3 2000 1.3 Q4 2000 1.9 Q1 2001 1.3 Q2 2001 0.3 Q3 2001 -1.3 Q4 2001 0
Gross domestic product (GDP), a broad measure of the goods and services produced in the United States during a given time period, is a prime indicator of the health of the country's economy. Typically, investors see an increase in GDP as a positive, since it indicates stronger demand, production and corporate earnings. The figures shown here are adjusted for inflation. Data source: Bloomberg L.P. - -------------------------------------------------------------------------------- 3 MARKET OVERVIEW Continued under, the technology sector collapsed. By the end of the year, markets had more than regained the ground lost after September 11, but many industries, especially airlines, hotels and entertainment, remain weak. In contrast, bonds continued to perform well. Strong demand from investors fleeing the stock market and the Fed's interest rate cuts were two main factors in pushing bond prices higher (and yields lower). A third factor was the U.S. Treasury's decision to use part of the vanishing budget surplus to buy back its own bonds, which reduced the supply of Treasuries. - -------------------------------------------------------------------------------- We expect interest rates and money market yields to rise when signs of an economic recovery materialize. - -------------------------------------------------------------------------------- LOOKING AHEAD: RECOVERY LIKELY IN 2002, BUT MAY BE LACKLUSTER. Many uncertainties still linger from September 11 and the ongoing war on terrorism. Further attacks on U.S. targets could hurt the economy or reverse the stock market's Q4 2001 gains. A decline in consumer spending (which so far has remained relatively strong) would be damaging as well. A further risk could be a rise in petroleum prices, which might occur if the antiterrorism coalition were to lose support from some Middle Eastern countries. - -------------------------------------------------------------------------------- U.S. UNEMPLOYMENT RATE Adjusted for seasonal variations After a decade of declines, unemployment rose dramatically during the report period. At the end of 2001, it stood at 5.8%--nearly two percentage points above its three-decade low of 3.9% in 2000. [LINE GRAPH]
Dec-91 7.3 Jan-92 7.3 Feb-92 7.4 Mar-92 7.4 Apr-92 7.4 May-92 7.6 Jun-92 7.8 Jul-92 7.7 Aug-92 7.6 Sep-92 7.6 Oct-92 7.3 Nov-92 7.4 Dec-92 7.4 Jan-93 7.3 Feb-93 7.1 Mar-93 7 Apr-93 7.1 May-93 7.1 Jun-93 7 Jul-93 6.9 Aug-93 6.8 Sep-93 6.7 Oct-93 6.8 Nov-93 6.6 Dec-93 6.5 Jan-94 6.8 Feb-94 6.6 Mar-94 6.5 Apr-94 6.4 May-94 6.1 Jun-94 6.1 Jul-94 6.3 Aug-94 6 Sep-94 5.8 Oct-94 5.8 Nov-94 5.6 Dec-94 5.5 Jan-95 5.6 Feb-95 5.4 Mar-95 5.3 Apr-95 5.8 May-95 5.8 Jun-95 5.6 Jul-95 5.6 Aug-95 5.7 Sep-95 5.6 Oct-95 5.5 Nov-95 5.7 Dec-95 5.6 Jan-96 5.6 Feb-96 5.5 Mar-96 5.6 Apr-96 5.5 May-96 5.6 Jun-96 5.3 Jul-96 5.5 Aug-96 5.1 Sep-96 5.2 Oct-96 5.2 Nov-96 5.3 Dec-96 5.4 Jan-97 5.3 Feb-97 5.3 Mar-97 5.1 Apr-97 5 May-97 4.7 Jun-97 5 Jul-97 4.7 Aug-97 4.9 Sep-97 4.7 Oct-97 4.7 Nov-97 4.6 Dec-97 4.7 Jan-98 4.5 Feb-98 4.6 Mar-98 4.6 Apr-98 4.3 May-98 4.3 Jun-98 4.5 Jul-98 4.5 Aug-98 4.5 Sep-98 4.5 Oct-98 4.5 Nov-98 4.4 Dec-98 4.3 Jan-99 4.3 Feb-99 4.4 Mar-99 4.2 Apr-99 4.3 May-99 4.2 Jun-99 4.3 Jul-99 4.3 Aug-99 4.2 Sep-99 4.2 Oct-99 4.1 Nov-99 4.1 Dec-99 4.1 Jan-00 4 Feb-00 4.1 Mar-00 4.1 Apr-00 3.9 May-00 4.1 Jun-00 4 Jul-00 4 Aug-00 4.1 Sep-00 3.9 Oct-00 3.9 Nov-00 4 Dec-00 4 Jan-01 4.2 Feb-01 4.2 Mar-01 4.3 Apr-01 4.5 May-01 4.4 Jun-01 4.5 Jul-01 4.5 Aug-01 4.9 Sep-01 4.9 Oct-01 5.4 Nov-01 5.6 Dec-01 5.8
This measures the portion of the U.S. labor force that is unemployed and is either seeking a job or waiting to return to one. Low unemployment often accompanies prosperity and is generally a positive factor for investors, although very low unemployment may boost inflation as employers raise pay to compete for workers. Rising unemployment may mean a softening economy. Data source: Bloomberg L.P. MEASURES OF INFLATION Annualized figures for the Consumer Price Index (monthly) and Employment Cost Index (quarterly) CPI was up 1.6% for 2001 (2.7% if food and energy are excluded). ECI rose 4.1% over the same period. Both measures show that inflation remained low by historical standards. [LINE GRAPH]
CONSUMER PRICE INDEX DATE (MONTHLY) Dec-91 3.1 Jan-92 2.6 Feb-92 2.8 Mar-92 3.2 Apr-92 3.2 May-92 3 Jun-92 3.1 Jul-92 3.2 Aug-92 3.1 Sep-92 3 Oct-92 3.2 Nov-92 3 Dec-92 2.9 Jan-93 3.3 Feb-93 3.2 Mar-93 3.1 Apr-93 3.2 May-93 3.2 Jun-93 3 Jul-93 2.8 Aug-93 2.8 Sep-93 2.7 Oct-93 2.8 Nov-93 2.7 Dec-93 2.7 Jan-94 2.5 Feb-94 2.5 Mar-94 2.5 Apr-94 2.4 May-94 2.3 Jun-94 2.5 Jul-94 2.8 Aug-94 2.9 Sep-94 3 Oct-94 2.6 Nov-94 2.7 Dec-94 2.7 Jan-95 2.8 Feb-95 2.9 Mar-95 2.9 Apr-95 3.1 May-95 3.2 Jun-95 3 Jul-95 2.8 Aug-95 2.6 Sep-95 2.5 Oct-95 2.8 Nov-95 2.6 Dec-95 2.5 Jan-96 2.7 Feb-96 2.7 Mar-96 2.8 Apr-96 2.9 May-96 2.9 Jun-96 2.8 Jul-96 3 Aug-96 2.9 Sep-96 3 Oct-96 3 Nov-96 3.3 Dec-96 3.3 Jan-97 3 Feb-97 3 Mar-97 2.8 Apr-97 2.5 May-97 2.2 Jun-97 2.3 Jul-97 2.2 Aug-97 2.2 Sep-97 2.2 Oct-97 2.1 Nov-97 1.8 Dec-97 1.7 Jan-98 1.6 Feb-98 1.4 Mar-98 1.4 Apr-98 1.4 May-98 1.7 Jun-98 1.7 Jul-98 1.7 Aug-98 1.6 Sep-98 1.5 Oct-98 1.5 Nov-98 1.5 Dec-98 1.6 Jan-99 1.7 Feb-99 1.6 Mar-99 1.7 Apr-99 2.3 May-99 2.1 Jun-99 2 Jul-99 2.1 Aug-99 2.3 Sep-99 2.6 Oct-99 2.6 Nov-99 2.6 Dec-99 2.7 Jan-00 2.7 Feb-00 3.2 Mar-00 3.7 Apr-00 3 May-00 3.1 Jun-00 3.7 Jul-00 3.7 Aug-00 3.4 Sep-00 3.5 Oct-00 3.4 Nov-00 3.4 Dec-00 3.4 Jan-01 3.7 Feb-01 3.5 Mar-01 2.9 Apr-01 3.3 May-01 3.6 Jun-01 3.2 Jul-01 2.7 Aug-01 2.7 Sep-01 2.6 Oct-01 2.1 Nov-01 1.9 Dec-01 1.6
EMPLOYMENT COST INDEX DATE (QUARTERLY) Mar-92 4 Jun-92 3.6 Sep-92 3.5 Dec-92 3.5 Mar-93 3.5 Jun-93 3.6 Sep-93 3.6 Dec-93 3.5 Mar-94 3.2 Jun-94 3.2 Sep-94 3.2 Dec-94 3 Mar-95 2.9 Jun-95 2.9 Sep-95 2.7 Dec-95 2.7 Mar-96 2.8 Jun-96 2.9 Sep-96 2.8 Dec-96 2.9 Mar-97 2.9 Jun-97 2.8 Sep-97 3 Dec-97 3.3 Mar-98 3.3 Jun-98 3.5 Sep-98 3.7 Dec-98 3.4 Mar-99 3 Jun-99 3.2 Sep-99 3.1 Dec-99 3.4 Mar-00 4.3 Jun-00 4.4 Sep-00 4.3 Dec-00 4.1 Mar-01 4.1 Jun-01 3.9 Sep-01 4.1 Dec-01 4.1
The Consumer Price Index (CPI) tracks changes in the cost of goods and services and is the most common measure of inflation. The Employment Cost Index (ECI) measures the cost of employing workers, including benefits costs. Financial markets are very sensitive to increases in inflation because of the potentially negative impact on corporate earnings, investors and consumers. Data source: Bloomberg L.P. - -------------------------------------------------------------------------------- 4 [PHOTO OF AMERICAN FLAG] Whether or not an economic recovery occurs in 2002, we expect that unemployment may continue to rise during the first half of the year, because it typically lags other economic factors. Other indicators, such as new orders and investor sentiment, indicate that the economy appears to be shifting back into gear, if somewhat slowly and tentatively. - -------------------------------------------------------------------------------- After marking a low on September 21 in the wake of the terrorist attacks, the S&P 500 Index(R) rose about 20% by the end of 2001. - -------------------------------------------------------------------------------- Source: Standard & Poor's Although we suspect the worst may be over for now as far as the U.S. economy is concerned, no one can predict with certainty that a recovery will occur in 2002, or how strong it might be if it does occur. We would not be surprised to see economic indicators and investor sentiment looking healthier by mid-2002, but see little reason to expect a quick turnaround. - -------------------------------------------------------------------------------- YIELDS OF U.S. TREASURY SECURITIES Effective yields of ten-year and five-year Treasuries For most of 2001, Treasury prices soared and yields plunged as investors sought security in the face of economic and stock market declines. Falling interest rates and a decreasing supply of Treasuries aided this trend. [LINE GRAPH]
Date 5 Yr 10 Yr 31-Dec-91 6.7 5.93 31-Jan-92 7.27 6.43 29-Feb-92 7.25 6.56 31-Mar-92 7.53 6.92 30-Apr-92 7.58 6.88 31-May-92 7.32 6.6 30-Jun-92 7.12 6.27 31-Jul-92 6.71 5.82 31-Aug-92 6.6 5.58 30-Sep-92 6.35 5.32 31-Oct-92 6.79 5.89 30-Nov-92 6.94 6.22 31-Dec-92 6.69 5.99 31-Jan-93 6.36 5.55 28-Feb-93 6.02 5.21 31-Mar-93 6.02 5.24 30-Apr-93 6.01 5.11 31-May-93 6.15 5.37 30-Jun-93 5.78 5.05 31-Jul-93 5.81 5.15 31-Aug-93 5.45 4.79 30-Sep-93 5.38 4.77 31-Oct-93 5.43 4.85 30-Nov-93 5.82 5.16 31-Dec-93 5.79 5.21 31-Jan-94 5.64 5.02 28-Feb-94 6.13 5.57 31-Mar-94 6.74 6.23 30-Apr-94 7.04 6.64 31-May-94 7.15 6.76 30-Jun-94 7.32 6.95 31-Jul-94 7.11 6.73 31-Aug-94 7.17 6.8 30-Sep-94 7.6 7.28 31-Oct-94 7.81 7.49 30-Nov-94 7.91 7.79 31-Dec-94 7.82 7.83 31-Jan-95 7.58 7.51 28-Feb-95 7.2 7.04 31-Mar-95 7.2 7.07 30-Apr-95 7.06 6.88 31-May-95 6.28 6.05 30-Jun-95 6.2 5.97 31-Jul-95 6.43 6.16 31-Aug-95 6.28 6.07 30-Sep-95 6.18 6.02 31-Oct-95 6.02 5.81 30-Nov-95 5.74 5.52 31-Dec-95 5.57 5.38 31-Jan-96 5.58 5.24 29-Feb-96 6.1 5.73 31-Mar-96 6.33 6.09 30-Apr-96 6.67 6.41 31-May-96 6.85 6.63 30-Jun-96 6.71 6.46 31-Jul-96 6.79 6.57 31-Aug-96 6.94 6.73 30-Sep-96 6.7 6.46 31-Oct-96 6.34 6.07 30-Nov-96 6.04 5.83 31-Dec-96 6.42 6.21 31-Jan-97 6.49 6.25 28-Feb-97 6.55 6.39 31-Mar-97 6.9 6.75 30-Apr-97 6.72 6.57 31-May-97 6.66 6.5 30-Jun-97 6.5 6.38 31-Jul-97 6.01 5.9 31-Aug-97 6.34 6.22 30-Sep-97 6.1 5.99 31-Oct-97 5.83 5.71 30-Nov-97 5.87 5.84 31-Dec-97 5.74 5.71 31-Jan-98 5.51 5.38 28-Feb-98 5.62 5.59 31-Mar-98 5.65 5.62 30-Apr-98 5.67 5.64 31-May-98 5.55 5.55 30-Jun-98 5.45 5.47 31-Jul-98 5.49 5.5 31-Aug-98 4.98 4.8 30-Sep-98 4.42 4.22 31-Oct-98 4.61 4.23 30-Nov-98 4.71 4.48 31-Dec-98 4.65 4.54 31-Jan-99 4.65 4.55 28-Feb-99 5.29 5.22 31-Mar-99 5.24 5.1 30-Apr-99 5.35 5.21 31-May-99 5.62 5.58 30-Jun-99 5.78 5.65 31-Jul-99 5.9 5.79 31-Aug-99 5.97 5.87 30-Sep-99 5.88 5.75 31-Oct-99 6.02 5.96 30-Nov-99 6.19 6.11 31-Dec-99 6.44 6.34 31-Jan-00 6.67 6.68 29-Feb-00 6.41 6.6 31-Mar-00 6 6.31 30-Apr-00 6.21 6.54 31-May-00 6.27 6.52 30-Jun-00 6.03 6.19 31-Jul-00 6.03 6.15 31-Aug-00 5.73 5.97 30-Sep-00 5.8 5.85 31-Oct-00 5.75 5.81 30-Nov-00 5.47 5.43 31-Dec-00 5.11 4.98 31-Jan-01 5.11 4.77 28-Feb-01 4.9 4.66 31-Mar-01 4.92 4.56 30-Apr-01 5.34 4.89 31-May-01 5.38 4.91 30-Jun-01 5.41 4.95 31-Jul-01 5.05 4.53 31-Aug-01 4.83 4.38 30-Sep-01 4.59 3.8 31-Oct-01 4.23 3.48 30-Nov-01 4.75 4.06 31-Dec-01 5.05 4.3
Yields, or interest rates, represent the cost of borrowing money. Rapid economic growth or the expectation of higher inflation can drive rates up, while the opposite conditions can push rates down. Data source: Bloomberg L.P. SHORT-TERM RATES Effective yields of 90-day commercial paper and three-month U.S. Treasury bills. Paced by the Fed's year-long series of interest rate cuts, short-term yields declined during the report period, although the downward trend halted during December, potentially indicating a bottom. [LINE GRAPH]
Weekly 3 Mo T-Bill 90-Day 31-Dec-00 5.9 6.28 05-Jan-01 5.12 5.85 12-Jan-01 5.32 5.48 19-Jan-01 5.24 5.43 26-Jan-01 5.17 5.34 02-Feb-01 5.09 5.2 09-Feb-01 5.05 5.21 16-Feb-01 4.98 5.16 23-Feb-01 4.89 5.14 02-Mar-01 4.84 4.9 09-Mar-01 4.71 4.89 16-Mar-01 4.53 4.76 23-Mar-01 4.34 4.65 30-Mar-01 4.29 4.73 06-Apr-01 3.93 4.63 13-Apr-01 4 4.58 20-Apr-01 3.76 4.24 27-Apr-01 3.85 4.17 04-May-01 3.73 4.08 11-May-01 3.74 3.89 18-May-01 3.59 3.85 25-May-01 3.66 3.81 01-Jun-01 3.66 3.85 08-Jun-01 3.64 3.73 15-Jun-01 3.5 3.68 22-Jun-01 3.44 3.56 29-Jun-01 3.66 3.63 06-Jul-01 3.64 3.64 13-Jul-01 3.62 3.6 20-Jul-01 3.51 3.56 27-Jul-01 3.53 3.53 03-Aug-01 3.52 3.53 10-Aug-01 3.42 3.45 17-Aug-01 3.37 3.42 24-Aug-01 3.45 3.35 31-Aug-01 3.37 3.33 07-Sep-01 3.25 3.29 14-Sep-01 2.73 3.1 21-Sep-01 2.25 2.39 28-Sep-01 2.37 2.38 05-Oct-01 2.18 2.38 12-Oct-01 2.25 2.31 19-Oct-01 2.2 2.23 26-Oct-01 2.15 2.18 02-Nov-01 2.05 2.06 09-Nov-01 1.84 1.81 16-Nov-01 1.95 1.98 23-Nov-01 1.96 2.02 30-Nov-01 1.73 1.89 07-Dec-01 1.7 1.8 14-Dec-01 1.72 1.74 21-Dec-01 1.7 1.78 28-Dec-01 1.72 1.78
Typically, the yields offered by commercial paper and three-month T-bills move in the same direction, and broadly reflect market interest rates and the Federal Funds Rate. The spread between these two investments' yields reflects investors' sense of how risky the obligations of banks and corporations are compared with lower-risk U.S. Government-backed T-bills. Data source: Bloomberg L.P. - -------------------------------------------------------------------------------- 5 SCHWAB MONEY MARKET FUND [PHOTO OF LINDA KLINGMAN AND MIKE NEITZKE] "Anticipating continued Fed rate cuts during 2001, we positioned the fund to delay the effects of declining rates by investing in securities with longer maturities." Portfolio Managers Linda Klingman and Mike Neitzke LINDA KLINGMAN, a vice president of the investment advisor and senior portfolio manager, has overall responsibility for the management of the fund. She joined the firm in 1990 and has 15 years of experience managing money market funds. MIKE NEITZKE, a portfolio manager, has day-to-day responsibility for management of the fund. Prior to joining the firm in March 2001, he worked for more than 15 years in the financial industry as a portfolio manager. TICKER SYMBOL SWMXX - -------------------------------------------------------------------------------- The fund seeks the highest current income consistent with stability of capital and liquidity. - -------------------------------------------------------------------------------- THIS FUND MAY MAKE SENSE FOR INVESTORS WHO ARE SEEKING HIGH MONEY MARKET RETURNS. MANAGERS' PERSPECTIVE SHORT-TERM INTEREST RATES DECLINED SHARPLY AND STEADILY THROUGHOUT 2001, PACED BY THE FED'S RATE CUTS. The Fed's 11 interest rate cuts, which began in January and continued into December, left the Federal Funds Rate at 1.75%, its lowest level in more than 40 years. These cuts had the direct effect of reducing yields for money fund investors. ANTICIPATING ECONOMIC WEAKNESS AND DECLINING INTEREST RATES, WE INVESTED IN SECURITIES WITH LONGER MATURITIES. Throughout the year, the fund maintained a dollar-weighted average maturity that was longer than that of its peer group. This enabled the fund to lock in yields for longer periods, which benefited the fund as yields continued to decline over the course of the year. While the fund has had to replace these securities with issues paying lower yields, this strategy enabled the fund to maintain competitive yields during a time of falling interest rates. EXPECTATIONS OF AN ECONOMIC RECOVERY IN 2002 ARE GAINING MOMENTUM. A stronger economy is likely to lead to a rise in interest rates and yields. As a result, we have begun to shorten our dollar-weighted average maturity, enhancing the fund's ability to benefit from increases in interest rates. 6 PERFORMANCE AND FUND FACTS SEVEN-DAY YIELDS 1 AS OF 12/31/01 The seven-day yields are calculated using standard SEC formulas. The effective yield includes the effect of reinvesting daily dividends. Please remember that money market fund yields fluctuate, and that past performance is not an indication of future results.
- -------------------------------------------------------------------------------- Seven-Day Yield 1.57% - -------------------------------------------------------------------------------- Seven-Day Effective Yield 1.58% - --------------------------------------------------------------------------------
WEIGHTED AVERAGE MATURITY DURING THE YEAR Money Funds must maintain a dollar-weighted average maturity of no longer than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months). [LINE GRAPH] 31-Dec-00 67 31-Jan-01 57 28-Feb-01 60 30-Mar-01 62 30-Apr-01 59 31-May-01 58 30-Jun-01 65 31-Jul-01 64 31-Aug-01 65 28-Sep-01 65 31-Oct-01 68 30-Nov-01 68 31-Dec-01 63
PORTFOLIO COMPOSITION 2 AS OF 12/31/01 - -------------------------------------------------------------------------------- All figures are shown as a percentage of the fund's investments. All of the fund's securities were in the top tier of credit quality at the time of purchase. BY SECURITY TYPE - -------------------------------------------------------------------------------- [PIE CHART] 1. 47.8% Commercial Paper and Other Corporate Obligations 2. 39.1% Certificates of Deposit 3. 6.4% Repurchase Agreements 4. 2.0% Variable-Rate Obligations 5. 1.7% U.S. Government Discount Notes 6. 1.5% Bank Notes 7. 1.4% Promissory Notes 8. 0.1% U.S. Government Notes
BY CREDIT QUALITY - -------------------------------------------------------------------------------- [PIE CHART] 1. 100.0% Tier 1
1 A portion of the fund's expenses was reduced during the reporting period. Without this reduction, the fund's yields would have been lower. 2 Composition of the fund's portfolio is as of 12/31/01 and is not indicative of holdings after that date. 7 SCHWAB MONEY MARKET FUND -- FINANCIALS FINANCIAL TABLES These pages provide additional data on the fund's performance, portfolio holdings, expenses and business operations. These figures have been audited by PricewaterhouseCoopers LLP. Two other sections of this report provide context for the data in these financials. The FINANCIAL NOTES section contains information about the fund's business structure, accounting practices and other matters, completing the data given in these tables. The final section, HOW TO READ THIS REPORT, includes guides designed to make the financials easy to read and understand. FINANCIAL HIGHLIGHTS
1/1/01- 1/1/00- 1/1/99- 1/1/98- 1/1/97- 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 - --------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) - --------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ------------------------------------------------------------ Income from investment operations: Net investment income 0.04 0.06 0.05 0.05 0.05 ------------------------------------------------------------ Less distributions: Dividends from net investment income (0.04) (0.06) (0.05) (0.05) (0.05) ------------------------------------------------------------ Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ============================================================ Total return (%) 3.73 5.84 4.64 4.99 5.04 RATIOS/SUPPLEMENTAL DATA (%) - --------------------------------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.75 0.75 1 0.75 0.75 0.75 Expense reductions reflected in above ratio 0.04 0.05 0.09 0.11 0.12 Ratio of net investment income to average net assets 3.63 5.70 4.56 4.87 4.93 Net assets, end of period ($ x 1,000,000) 49,116 41,823 36,099 27,439 21,421
1 Would have been 0.76% if certain non-routine expenses (proxy fees) had been included. See the Financial Notes, which are integral to this information. 8 PORTFOLIO HOLDINGS As of December 31, 2001. This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: * Asset-backed security + Credit-enhanced security o Illiquid restricted security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase, except for U.S. government coupon notes and U.S. Treasury notes, for which the rate shown is the interest rate (the rate established when obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date. The pie chart below shows the fund's major categories and the market value and cost of the securities in each category. For definitions of abbreviations and acronyms used in security descriptions, see "portfolio terms" in the glossary (in "How to Read This Report"). ALL DOLLAR VALUES ARE IN THOUSANDS. [PIE CHART] 89.8% FIXED-RATE OBLIGATIONS Market Value: $44,039,541 Cost: $44,039,541 2.0% VARIABLE-RATE OBLIGATIONS Market Value: $954,218 Cost: $954,218 1.8% FIXED-RATE U.S. GOVERNMENT SECURITIES Market Value: $909,912 Cost: $909,912 6.4% OTHER INVESTMENTS Market Value: $3,144,061 Cost: $3,144,061 - ---------------------------------------------- 100.00% TOTAL INVESTMENTS Market Value: $49,047,732 Cost: $49,047,732
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) FIXED-RATE OBLIGATIONS 89.8% of investments COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS 47.8% - -------------------------------------------------------------------------------- AB SPINTAB 2.50%, 01/22/02 35,000 34,949 2.33%, 02/11/02 45,000 44,882 1.81%, 03/11/02 66,000 65,772 AMERICAN EXPRESS CREDIT CORP. 1.96%, 03/07/02 50,000 49,824 1.96%, 03/08/02 100,000 99,642 2.48%, 03/28/02 45,000 44,737 * AMSTERDAM FUNDING CORP. 2.03%, 01/02/02 35,000 34,998 2.11%, 01/02/02 36,000 35,998 2.13%, 01/02/02 36,000 35,998 2.03%, 01/03/02 69,000 68,992 1.98%, 01/04/02 36,689 36,683 1.85%, 01/08/02 60,000 59,978 2.22%, 01/25/02 75,000 74,890 2.25%, 01/25/02 74,000 73,889 2.13%, 01/29/02 50,000 49,918 2.13%, 01/30/02 50,000 49,915 2.18%, 01/30/02 100,000 99,825 ANZ (DELAWARE), INC. 1.90%, 03/05/02 23,000 22,924 * APRECO, INC. 2.13%, 01/09/02 50,000 49,976 2.13%, 01/15/02 15,000 14,988 2.22%, 01/23/02 67,000 66,910 2.06%, 01/24/02 60,000 59,921 2.08%, 02/15/02 10,000 9,974 2.34%, 02/15/02 10,000 9,971 2.07%, 03/15/02 10,000 9,958 *+ ATLANTIS ONE FUNDING CORP. 2.14%, 01/28/02 30,000 29,952 2.14%, 01/29/02 90,000 89,851 2.32%, 02/14/02 69,540 69,345 2.16%, 02/15/02 20,000 19,946 2.31%, 02/15/02 60,000 59,828 2.32%, 02/19/02 394,000 392,767 2.07%, 03/05/02 124,324 123,876 2.09%, 03/07/02 18,000 17,933 2.66%, 03/11/02 26,000 25,869 3.25%, 03/11/02 10,000 9,939 1.86%, 03/28/02 25,000 24,890
See the Financial Notes, which are integral to this information. 9 SCHWAB MONEY MARKET FUND - FINANCIALS PORTFOLIO HOLDINGS Continued As of December 31, 2001.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) 2.50%, 03/28/02 23,368 23,230 2.17%, 04/25/02 100,000 99,319 2.16%, 04/26/02 57,000 56,611 BANK OF NOVA SCOTIA 2.11%, 02/05/02 95,000 94,806 BARCLAYS U.S. FUNDING CORP. 1.95%, 02/14/02 190,000 189,549 * BARTON CAPITAL CORP. 2.11%, 01/02/02 80,000 79,995 *+ BAVARIA TRR CORP. 2.15%, 01/04/02 15,000 14,997 1.84%, 01/08/02 11,875 11,871 2.12%, 01/10/02 13,000 12,993 * BAVARIA UNIVERSAL FUNDING CORP. 2.23%, 01/28/02 21,620 21,584 1.96%, 02/07/02 14,121 14,093 2.21%, 02/15/02 2,299 2,293 2.51%, 02/25/02 30,537 30,421 2.09%, 02/28/02 1,061 1,057 3.45%, 03/01/02 8,550 8,502 1.94%, 03/04/02 34,000 33,887 1.86%, 03/20/02 20,000 19,920 2.32%, 04/02/02 25,000 24,855 2.47%, 04/02/02 50,000 49,692 2.26%, 04/18/02 70,000 69,536 2.32%, 04/19/02 35,000 34,760 1.90%, 05/08/02 25,501 25,332 BEAR STEARNS COMPANIES, INC. 2.13%, 01/22/02 120,000 119,852 2.16%, 02/11/02 80,000 79,804 2.22%, 02/22/02 100,000 99,682 2.23%, 03/01/02 45,000 44,837 1.81%, 03/21/02 125,000 124,505 * BETA FINANCE, INC. 2.12%, 02/06/02 34,500 34,427 2.33%, 04/15/02 19,000 18,874 4.27%, 05/02/02 85,000 85,000 4.10%, 07/15/02 21,000 21,000 3.95%, 07/16/02 24,000 24,011 2.40%, 11/26/02 85,000 85,000 * BETA FINANCE, INC., 144A 5.27%, 02/25/02 99,000 98,999 4.32%, 05/09/02 115,000 115,000 4.20%, 05/13/02 46,000 45,985 CBA (DELAWARE) FINANCE, INC. 1.91%, 02/13/02 25,000 24,943 2.00%, 03/01/02 41,000 40,866 1.91%, 03/04/02 50,000 49,836 1.86%, 03/05/02 45,000 44,854 * CC (USA), INC. 2.13%, 02/06/02 50,000 49,894 2.13%, 02/12/02 50,000 49,876 3.44%, 02/28/02 13,500 13,426 2.64%, 03/04/02 40,500 40,318 2.64%, 03/06/02 25,000 24,884 3.47%, 03/06/02 18,000 17,891 2.33%, 04/15/02 34,500 34,271 2.26%, 04/23/02 30,500 30,288 * CC (USA), INC., 144A 4.66%, 03/28/02 60,000 60,000 4.26%, 05/20/02 60,000 60,000 4.10%, 07/15/02 24,000 24,000 4.05%, 07/16/02 20,000 20,000 3.74%, 08/06/02 100,000 100,000 * CIESCO, LP 2.03%, 01/08/02 50,000 49,980 CITICORP 1.90%, 01/11/02 150,000 149,921 * CLIPPER RECEIVABLES CORP. 1.88%, 01/17/02 50,000 49,958 * CONCORD MINUTEMEN CAPITAL CO., L.L.C. Series A 2.37%, 01/15/02 36,535 36,501 1.92%, 02/06/02 40,000 39,924 1.92%, 02/07/02 20,376 20,336 1.96%, 02/07/02 9,249 9,230 1.93%, 02/12/02 60,000 59,866 2.33%, 02/14/02 111,000 110,687 1.83%, 03/11/02 17,225 17,165 3.01%, 03/12/02 10,000 9,942 2.34%, 04/05/02 36,118 35,900 * CORPORATE ASSET INC. FUNDING CO., INC. 2.21%, 01/23/02 10,813 10,798 2.19%, 02/05/02 75,000 74,841 2.08%, 02/14/02 130,000 129,671 2.05%, 02/22/02 135,000 134,602 1.91%, 03/07/02 18,000 17,938 * CORPORATE RECEIVABLES CORP. 1.88%, 01/15/02 100,000 99,927
See the Financial Notes, which are integral to this information. 10
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) CREDIT SUISSE FIRST BOSTON, INC. 3.40%, 03/04/02 75,000 74,568 * CXC, INC. 2.27%, 01/25/02 10,000 9,985 2.18%, 02/07/02 100,000 99,777 2.08%, 02/22/02 120,000 119,641 * DAKOTA CP NOTES OF CITIBANK CREDIT CARD ISSUANCE TRUST 1.96%, 01/08/02 45,000 44,983 2.07%, 01/09/02 195,000 194,910 DANSKE CORP. 1.89%, 02/08/02 50,000 49,901 2.05%, 02/27/02 93,000 92,700 DEN NORSKE BANK ASA 2.06%, 02/22/02 20,000 19,941 2.05%, 02/27/02 30,000 29,903 1.78%, 03/04/02 25,000 24,924 2.04%, 03/06/02 51,750 51,563 1.76%, 03/13/02 36,000 35,875 DEUTSCHE BANK FINANCIAL, INC. 2.03%, 02/08/02 40,000 39,915 1.86%, 02/27/02 40,000 39,883 DEXIA DELAWARE L.L.C. 2.05%, 02/04/02 48,000 47,908 2.05%, 02/26/02 245,000 244,223 1.82%, 03/14/02 70,000 69,747 * DORADA FINANCE, INC. 2.36%, 01/22/02 80,000 79,890 2.14%, 01/29/02 13,000 12,978 1.92%, 02/07/02 15,500 15,470 2.13%, 02/15/02 25,000 24,934 3.44%, 02/28/02 42,000 41,771 2.33%, 04/15/02 44,000 43,708 * DORADA FINANCE, INC., 144A 4.66%, 04/04/02 40,000 40,000 4.26%, 05/20/02 72,000 72,000 3.96%, 07/19/02 19,000 18,998 * EDISON ASSET SECURITIZATION CORP., L.L.C. 2.20%, 01/24/02 290,000 289,594 2.07%, 02/15/02 31,000 30,920 *+ ENTERPRISE FUNDING CORP. 1.90%, 01/07/02 25,000 24,992 1.88%, 01/15/02 111,310 111,229 1.90%, 01/15/02 78,563 78,505 * FALCON ASSET SECURITIZATION CORP. 2.04%, 01/09/02 49,000 48,978 2.30%, 02/04/02 53,795 53,679 FORENINGSSPARBANKEN AB (SWEDBANK) 1.91%, 02/13/02 50,000 49,887 *+ FORRESTAL FUNDING MASTER TRUST 2.05%, 01/03/02 175,000 174,980 2.11%, 01/07/02 50,000 49,983 2.13%, 01/07/02 130,570 130,524 2.10%, 01/08/02 45,752 45,733 2.09%, 01/09/02 65,000 64,970 2.09%, 01/11/02 80,200 80,154 2.12%, 01/11/02 28,712 28,695 1.97%, 01/14/02 23,305 23,288 2.11%, 01/18/02 30,000 29,970 2.14%, 01/23/02 168,000 167,781 2.11%, 01/25/02 20,000 19,972 1.93%, 03/05/02 12,000 11,960 FORTIS FUNDING, L.L.C. 2.04%, 01/03/02 100,000 99,989 2.04%, 01/07/02 100,000 99,966 2.05%, 02/14/02 22,000 21,945 1.77%, 03/11/02 50,000 49,831 1.75%, 03/14/02 50,000 49,826 * GALAXY FUNDING, INC. 2.31%, 01/16/02 80,000 79,923 2.23%, 01/22/02 148,000 147,808 3.44%, 01/25/02 35,000 34,921 2.04%, 02/12/02 25,000 24,941 2.07%, 02/12/02 26,000 25,938 1.93%, 02/15/02 28,000 27,933 2.02%, 02/27/02 55,000 54,825 2.08%, 02/27/02 60,000 59,803 1.83%, 03/18/02 31,000 30,881 GE CAPITAL INTERNATIONAL FUNDING, INC. 2.31%, 02/12/02 49,000 48,869 2.29%, 02/14/02 71,000 70,803 2.23%, 02/20/02 60,000 59,816 2.07%, 02/27/02 44,000 43,856 1.78%, 03/08/02 83,000 82,731 2.32%, 03/14/02 141,000 140,351 1.79%, 03/15/02 32,000 31,884 1.84%, 03/26/02 23,000 22,902 GE FINANCIAL ASSURANCE HOLDINGS, INC. 1.83%, 03/20/02 75,000 74,704
See the Financial Notes, which are integral to this information. 11 SCHWAB MONEY MARKET FUND - FINANCIALS PORTFOLIO HOLDINGS Continued As of December 31, 2001.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) GENERAL ELECTRIC CAPITAL CORP. 2.23%, 01/24/02 220,000 219,688 2.11%, 01/28/02 25,000 24,961 2.12%, 01/29/02 45,000 44,926 2.38%, 02/01/02 28,000 27,943 2.32%, 02/06/02 130,000 129,701 2.32%, 02/07/02 150,000 149,645 2.17%, 02/21/02 70,000 69,787 2.17%, 02/22/02 250,000 249,224 2.10%, 02/25/02 160,000 159,489 2.10%, 02/26/02 260,000 259,155 1.87%, 03/01/02 154,000 153,531 1.88%, 03/01/02 25,000 24,923 2.34%, 03/08/02 30,000 29,872 1.81%, 03/27/02 35,000 34,851 GENERAL ELECTRIC CAPITAL SERVICES 2.30%, 02/13/02 74,000 73,798 2.28%, 02/14/02 70,000 69,807 2.10%, 02/26/02 20,000 19,935 1.83%, 03/20/02 64,000 63,748 * GIRO FUNDING US CORP. 1.99%, 01/11/02 20,000 19,989 1.99%, 01/14/02 150,000 149,893 2.54%, 01/22/02 16,000 15,976 2.09%, 02/01/02 100,000 99,821 2.36%, 02/11/02 29,000 28,923 2.30%, 02/15/02 55,000 54,843 2.09%, 02/22/02 18,000 17,946 * GIRO MULTI FUNDING CORP. 2.07%, 01/02/02 27,563 27,561 2.12%, 01/03/02 15,632 15,630 2.54%, 01/31/02 27,410 27,352 1.80%, 02/12/02 50,000 49,896 2.05%, 02/28/02 39,410 39,280 1.80%, 03/15/02 34,381 34,256 1.97%, 03/28/02 45,697 45,483 GOLDMAN SACHS GROUP, INC. 3.04%, 03/13/02 268,000 266,417 *o GREENWICH FUNDING CORP. 1.96%, 01/09/02 136,000 135,941 1.96%, 01/10/02 109,000 108,947 2.58%, 01/11/02 90,000 89,936 * GREYHAWK FUNDING, L.L.C. 2.06%, 02/13/02 140,000 139,657 Halifax, PLC 2.24%, 02/19/02 60,000 59,819 *+ HALOGEN CAPITAL COMPANY, L.L.C. 2.33%, 01/14/02 29,240 29,216 2.62%, 01/14/02 40,000 39,962 2.37%, 01/17/02 50,618 50,565 2.20%, 01/18/02 8,046 8,038 2.05%, 02/14/02 30,000 29,925 2.08%, 02/15/02 30,000 29,922 * HATTERAS FUNDING CORP. 2.25%, 01/24/02 45,000 44,936 2.30%, 01/29/02 100,000 99,822 2.23%, 02/01/02 30,000 29,943 1.94%, 02/11/02 45,000 44,901 1.79%, 03/13/02 24,000 23,916 *+ INDEPENDENCE FUNDING, L.L.C. 1.85%, 01/11/02 39,270 39,250 1.92%, 02/13/02 128,684 128,390 1.89%, 02/25/02 50,595 50,450 *+ INTREPID FUNDING MASTER TRUST 2.10%, 01/08/02 91,302 91,265 2.05%, 02/27/02 100,072 99,749 1.87%, 03/22/02 6,055 6,030 J.P. MORGAN CHASE & Co. 2.24%, 01/23/02 200,000 199,727 2.00%, 02/19/02 100,000 99,729 2.00%, 02/20/02 338,000 337,066 2.00%, 02/21/02 300,000 299,154 1.83%, 04/03/02 130,000 129,395 * JUPITER SECURITIZATION CORP. 1.92%, 01/14/02 35,945 35,920 1.92%, 01/16/02 45,120 45,084 2.22%, 01/28/02 7,902 7,889 1.88%, 01/29/02 125,000 124,817 2.05%, 01/30/02 15,000 14,975 2.21%, 01/30/02 10,228 10,210 2.11%, 02/26/02 7,200 7,176 * K2 (USA), L.L.C. 2.36%, 01/18/02 18,000 17,980 2.88%, 01/18/02 10,000 9,987 3.51%, 02/08/02 63,000 62,771 3.49%, 02/14/02 23,000 22,904 2.63%, 02/15/02 20,000 19,935 3.44%, 02/26/02 16,000 15,916 2.33%, 03/04/02 12,000 11,952 2.34%, 03/04/02 40,000 39,840 2.64%, 03/06/02 20,000 19,907 3.43%, 03/11/02 34,000 33,780
See the Financial Notes, which are integral to this information. 12
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) 2.35%, 03/15/02 52,000 51,754 3.50%, 03/15/02 25,000 24,826 2.50%, 03/22/02 9,000 8,951 2.51%, 03/28/02 27,500 27,337 2.32%, 04/08/02 67,000 66,587 2.33%, 04/15/02 20,977 20,838 2.32%, 04/17/02 14,000 13,906 2.05%, 05/30/02 15,000 14,874 *+ KITTY HAWK FUNDING CORP. 2.15%, 01/07/02 54,089 54,070 1.88%, 01/15/02 100,000 99,927 2.01%, 01/31/02 25,805 25,762 1.91%, 02/07/02 50,000 49,902 1.99%, 02/28/02 10,379 10,346 2.06%, 03/08/02 34,000 33,872 1.81%, 03/11/02 50,000 49,828 1.84%, 03/18/02 16,348 16,285 2.50%, 03/20/02 21,431 21,316 1.89%, 04/30/02 28,191 28,016 LANDESBANK SCHLESWIG-HOLSTEIN GIROZENTRALE 5.30%, 01/03/02 100,000 99,972 5.42%, 01/17/02 50,000 49,886 2.03%, 02/19/02 20,000 19,945 2.03%, 02/26/02 1,000 997 1.82%, 03/20/02 40,000 39,843 4.29%, 04/25/02 40,000 39,479 1.84%, 06/10/02 4,000 3,968 1.90%, 06/11/02 85,000 84,283 * LEXINGTON PARKER CAPITAL CORP. 2.32%, 01/17/02 51,053 51,001 2.33%, 01/17/02 30,000 29,969 3.65%, 01/23/02 160,000 159,649 3.66%, 01/23/02 4,000 3,991 3.53%, 01/24/02 30,000 29,933 3.65%, 01/25/02 45,000 44,892 2.14%, 02/05/02 50,000 49,896 3.49%, 03/01/02 25,000 24,859 2.30%, 04/17/02 20,035 19,901 * LINKS FINANCE, L.L.C. 3.59%, 01/23/02 27,000 26,942 3.49%, 02/15/02 17,000 16,927 1.86%, 02/25/02 20,000 19,943 1.91%, 03/04/02 29,000 28,905 1.94%, 03/06/02 22,000 21,925 2.48%, 03/11/02 16,000 15,925 2.16%, 04/29/02 16,000 15,888 2.05%, 05/08/02 11,000 10,921 LLOYDS TSB BANK, PLC 2.04%, 02/04/02 170,000 169,674 1.81%, 03/21/02 94,000 93,629 * MARKET STREET FUNDING CORP. 2.12%, 01/08/02 45,000 44,982 MORGAN STANLEY, DEAN WITTER & CO., INC. 1.84%, 02/13/02 50,000 49,891 1.84%, 02/25/02 110,000 109,692 2.00%, 02/26/02 88,000 87,727 2.01%, 02/27/02 200,000 199,368 * NEWCASTLE CERTIFICATES PROGRAM 2.09%, 01/15/02 91,300 91,226 1.80%, 01/18/02 115,000 114,902 2.13%, 01/29/02 62,649 62,546 2.11%, 02/21/02 19,000 18,943 * PARK AVENUE RECEIVABLES CORP. 1.82%, 01/14/02 80,168 80,115 * PREFERRED RECEIVABLES FUNDING CORP. 2.11%, 01/11/02 120,000 119,930 2.23%, 01/25/02 67,145 67,046 2.13%, 02/05/02 46,320 46,225 * QUINCY CAPITAL CORP. 2.03%, 01/04/02 82,754 82,740 2.10%, 01/09/02 35,000 34,984 *+ RECEIVABLES CAPITAL CORP. 2.10%, 02/19/02 19,711 19,655 ROYAL BANK OF CANADA 1.96%, 02/13/02 11,500 11,473 SALOMON SMITH BARNEY HOLDINGS, INC. 1.95%, 01/02/02 230,000 229,988 SAN PAOLO IMI U.S. FINANCIAL CO. 1.90%, 02/12/02 70,000 69,846 2.07%, 02/26/02 20,000 19,936 SANTANDER FINANCIAL (DELAWARE), INC. 2.12%, 02/01/02 95,000 94,828 2.03%, 02/07/02 80,000 79,834 1.89%, 03/04/02 50,000 49,838 1.89%, 03/05/02 16,000 15,947 * SIGMA FINANCE, INC. 2.08%, 02/25/02 7,000 6,978 2.55%, 02/25/02 10,000 9,962 3.31%, 03/07/02 90,000 89,470 2.80%, 03/11/02 50,000 49,736 2.63%, 03/21/02 11,000 10,937 2.34%, 04/03/02 36,000 35,787
See the Financial Notes, which are integral to this information. 13 SCHWAB MONEY MARKET FUND - FINANCIALS PORTFOLIO HOLDINGS Continued As of December 31, 2001.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) 2.32%, 04/11/02 25,000 24,841 2.33%, 04/17/02 20,000 19,865 2.05%, 05/02/02 30,000 29,795 * SIGMA FINANCE, INC., 144A 4.80%, 04/25/02 80,000 80,000 4.32%, 05/08/02 50,000 50,005 4.20%, 05/15/02 30,000 29,989 4.06%, 06/17/02 54,000 54,010 3.92%, 07/22/02 48,000 48,045 3.93%, 07/22/02 50,000 50,044 3.77%, 08/02/02 100,000 100,000 3.37%, 09/20/02 100,000 100,183 2.83%, 09/25/02 60,000 60,000 2.50%, 10/16/02 50,000 50,023 2.50%, 10/23/02 90,000 90,000 2.60%, 11/15/02 25,000 24,873 SOCIETE GENERALE, N.A., INC. 2.30%, 02/12/02 279,000 278,258 2.01%, 02/28/02 230,000 229,259 * STELLAR FUNDING GROUP, INC. 1.96%, 01/07/02 11,746 11,742 2.29%, 01/16/02 9,000 8,991 2.33%, 01/16/02 17,795 17,778 3.67%, 01/23/02 13,620 13,590 2.27%, 01/24/02 22,478 22,446 2.14%, 01/31/02 15,000 14,973 2.54%, 02/05/02 16,028 15,989 3.52%, 02/05/02 15,627 15,574 2.53%, 02/13/02 16,540 16,490 2.11%, 02/15/02 13,000 12,966 1.91%, 02/27/02 11,226 11,192 2.52%, 02/28/02 19,450 19,372 2.53%, 03/13/02 9,126 9,081 1.86%, 03/18/02 15,844 15,782 1.87%, 03/18/02 9,944 9,905 2.51%, 03/20/02 15,222 15,140 2.34%, 04/10/02 17,000 16,892 2.30%, 04/11/02 17,168 17,060 2.11%, 04/29/02 14,000 13,904 1.91%, 05/06/02 12,119 12,039 SVENSKA HANDELSBANKEN, INC. 2.26%, 02/08/02 70,000 69,834 1.81%, 03/20/02 40,000 39,844 *+ TRIPLE-A ONE FUNDING CORP. 1.96%, 01/10/02 64,193 64,162 1.90%, 01/11/02 25,439 25,426 2.21%, 01/28/02 14,114 14,091 *+ TULIP FUNDING CORP. 2.11%, 01/07/02 25,000 24,991 2.30%, 02/15/02 37,412 37,305 2.26%, 02/20/02 93,485 93,194 1.81%, 03/11/02 65,000 64,776 2.30%, 03/18/02 70,000 69,664 TYCO CAPITAL CORP. 2.17%, 02/11/02 105,000 104,742 2.11%, 02/26/02 168,000 167,451 1.89%, 03/01/02 31,000 30,904 1.79%, 03/08/02 37,000 36,879 * VARIABLE FUNDING CAPITAL CORP. 2.10%, 01/03/02 135,000 134,984 2.10%, 01/04/02 140,000 139,976 2.11%, 01/04/02 190,000 189,967 1.97%, 01/07/02 45,311 45,296 2.11%, 01/07/02 25,000 24,991 2.61%, 02/21/02 40,000 39,854 * WCP FUNDING, INC. 1.90%, 01/15/02 40,000 39,970 2.08%, 02/22/02 98,000 97,707 WESTPAC CAPITAL CORP. 1.91%, 02/12/02 56,800 56,674 2.26%, 04/17/02 71,000 70,534 * WINDMILL FUNDING 1.98%, 01/02/02 25,000 24,999 1.98%, 01/09/02 12,000 11,995 2.22%, 01/25/02 100,000 99,853 2.25%, 01/25/02 100,000 99,851 2.13%, 01/29/02 50,000 49,918 2.18%, 01/29/02 14,000 13,976 2.13%, 01/30/02 50,000 49,915 2.08%, 02/22/02 25,000 24,925 1.84%, 03/21/02 42,000 41,831 ---------- 23,420,448 CERTIFICATES OF DEPOSIT 39.1% ---------------------------------------------------------------------------- ABBEY NATIONAL TREASURY SERVICES, PLC 2.06%, 02/01/02 49,000 49,005 2.05%, 02/05/02 120,000 120,000 2.05%, 02/06/02 130,000 130,000 2.01%, 02/22/02 85,000 85,000 2.22%, 04/02/02 54,000 54,025 4.20%, 05/30/02 98,000 98,000 3.86%, 07/22/02 82,000 82,000
See the Financial Notes, which are integral to this information. 14
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) ABN AMRO BANK, NV 2.28%, 04/15/02 15,000 15,002 AMERICAN EXPRESS CENTURION BANK 2.55%, 01/10/02 100,000 100,000 2.10%, 02/05/02 90,000 90,000 AUSTRALIA & NEW ZEALAND BANKING GROUP, LTD. 2.23%, 03/22/02 75,000 75,008 2.28%, 04/19/02 50,000 50,001 BANCO BILBAO VIZCAYA ARGENTARIA SA 1.95%, 02/15/02 47,000 47,000 1.83%, 03/27/02 47,000 47,002 BANK OF MONTREAL 1.90%, 03/11/02 69,000 69,000 1.75%, 03/14/02 148,000 148,000 1.75%, 03/15/02 150,000 150,000 BANK OF NOVA SCOTIA 2.10%, 02/05/02 50,000 50,000 1.90%, 02/13/02 95,000 95,001 1.95%, 02/15/02 50,000 50,000 2.00%, 02/20/02 55,000 55,000 2.05%, 02/20/02 10,000 10,000 2.01%, 03/01/02 99,000 99,000 1.92%, 03/05/02 25,000 25,000 1.77%, 03/12/02 45,000 45,000 1.89%, 03/12/02 25,000 25,000 1.81%, 03/21/02 100,000 100,000 1.81%, 03/27/02 133,000 133,000 BANK OF SCOTLAND 2.25%, 04/19/02 60,000 60,000 BANK OF SCOTLAND TREASURY SERVICES, PLC 2.16%, 02/28/02 65,000 65,000 1.90%, 03/05/02 180,000 180,002 1.82%, 04/05/02 10,000 10,002 2.24%, 04/05/02 25,000 25,005 BARCLAYS BANK, PLC 2.05%, 01/16/02 144,000 143,996 2.09%, 01/22/02 153,000 153,000 1.78%, 03/11/02 49,000 49,012 4.43%, 04/10/02 47,000 47,000 2.22%, 04/18/02 50,000 50,346 4.29%, 04/25/02 50,000 50,000 4.11%, 05/09/02 25,000 25,001 BAYERISCHE HYPO-UND VEREINSBANK, AG 2.05%, 01/25/02 110,000 110,000 1.92%, 02/13/02 25,000 25,000 1.95%, 02/14/02 100,000 100,000 2.01%, 02/15/02 60,000 60,000 2.30%, 02/19/02 90,000 90,000 2.01%, 02/20/02 175,000 175,000 1.86%, 03/06/02 88,000 88,000 1.86%, 03/07/02 90,000 90,000 1.75%, 03/21/02 10,000 10,000 BAYERISCHE LANDESBANK GIROZENTRALE 2.30%, 02/05/02 19,500 19,549 1.87%, 03/06/02 220,000 220,004 4.53%, 04/12/02 145,000 145,000 BNP PARIBAS 2.32%, 02/04/02 183,000 183,000 2.32%, 02/05/02 150,000 150,000 1.89%, 02/13/02 20,000 20,000 1.86%, 03/08/02 98,000 98,000 1.75%, 03/14/02 50,000 50,000 1.82%, 03/18/02 65,000 64,993 1.82%, 03/19/02 150,000 150,002 2.22%, 03/22/02 466,000 466,000 CANADIAN IMPERIAL BANK OF COMMERCE 5.41%, 01/22/02 48,000 48,000 4.62%, 03/28/02 94,000 93,996 4.64%, 03/28/02 25,000 24,999 3.84%, 07/22/02 450,000 449,988 3.88%, 07/23/02 76,000 75,992 3.80%, 07/31/02 80,000 79,993 CHASE MANHATTAN BANK N.A. USA, 2.10%, 02/01/02 278,000 278,000 1.85%, 03/07/02 282,000 282,000 1.85%, 03/08/02 350,000 350,000 CITIBANK, N.A. 2.05%, 02/21/02 150,000 150,000 1.86%, 03/07/02 239,000 239,000 1.80%, 04/02/02 100,000 100,000 COMMERZBANK, AG 1.79%, 03/13/02 233,000 233,000 CREDIT AGRICOLE INDOSUEZ 2.03%, 02/08/02 150,000 150,000 1.75%, 03/18/02 110,000 110,000 DANSKE BANK A/S 1.96%, 02/14/02 50,000 50,000 1.84%, 02/27/02 48,000 48,000 1.89%, 03/14/02 80,000 80,002 DEN NORSKE BANK 2.11%, 02/06/02 22,000 22,000
See the Financial Notes, which are integral to this information. 15 SCHWAB MONEY MARKET FUND - FINANCIALS PORTFOLIO HOLDINGS Continued As of December 31, 2001.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) DEUTSCHE BANK, AG 2.23%, 02/08/02 255,000 255,000 4.81%, 03/15/02 300,000 299,983 2.47%, 03/19/02 455,000 455,000 3.80%, 07/19/02 105,000 104,992 3.70%, 10/04/02 50,000 49,996 DRESDNER BANK, AG 2.19%, 01/28/02 45,000 45,002 2.07%, 03/05/02 70,000 70,000 1.91%, 03/06/02 95,000 95,000 1.80%, 03/18/02 65,000 65,000 FIRST TENNESSEE BANK, N.A. 2.21%, 01/28/02 20,000 20,000 FORENINGSSPARBANKEN AB (SWEDBANK) 1.81%, 03/21/02 50,000 50,000 HALIFAX, PLC 2.31%, 02/04/02 50,000 50,007 2.04%, 02/05/02 25,000 25,001 2.30%, 02/19/02 90,000 90,000 2.08%, 02/28/02 25,000 25,000 1.91%, 03/11/02 73,000 72,997 1.81%, 03/20/02 150,000 150,000 2.22%, 03/26/02 20,000 20,000 2.23%, 04/19/02 25,000 25,003 2.05%, 04/25/02 100,000 100,059 1.90%, 06/05/02 60,000 60,000 2.57%, 09/25/02 50,000 50,000 ING BANK NV 3.72%, 01/11/02 20,000 20,000 1.91%, 02/11/02 49,000 49,000 2.06%, 02/28/02 87,000 87,000 1.97%, 03/04/02 29,000 29,000 1.89%, 03/05/02 75,000 75,000 1.90%, 03/11/02 75,000 75,000 1.77%, 03/14/02 256,000 256,000 1.77%, 03/15/02 260,000 260,000 1.77%, 03/18/02 125,000 125,000 1.82%, 03/19/02 150,000 150,000 1.83%, 03/25/02 45,000 45,000 1.83%, 03/28/02 69,000 69,000 J.P. MORGAN CHASE BANK 1.75%, 03/15/02 93,000 93,000 1.75%, 03/18/02 275,000 275,000 LANDESBANK BADEN WURTTEMBERG 2.02%, 02/15/02 92,000 91,987 2.02%, 02/19/02 50,000 50,000 2.03%, 02/25/02 100,000 100,000 2.05%, 02/27/02 95,000 95,003 2.06%, 02/28/02 75,000 75,001 1.81%, 03/21/02 49,000 49,001 1.84%, 03/28/02 28,000 28,000 LANDESBANK HESSEN-THURINGEN GIROZENTRALE 2.10%, 02/04/02 65,000 65,000 1.89%, 02/11/02 25,000 25,001 3.45%, 02/28/02 50,000 50,000 3.30%, 03/04/02 50,000 50,004 LLOYDS TSB BANK, PLC 1.91%, 02/11/02 18,000 17,999 1.95%, 02/13/02 35,000 34,998 2.03%, 02/25/02 196,000 196,000 1.87%, 03/04/02 50,000 50,000 1.75%, 03/13/02 30,000 30,000 1.80%, 03/21/02 50,000 50,000 1.80%, 03/26/02 120,000 120,000 NATIONAL AUSTRALIA BANK, LTD. 4.44%, 04/12/02 75,000 75,000 NATIONAL BANK OF CANADA 1.89%, 02/13/02 25,000 25,000 NATIONAL WESTMINSTER BANK, PLC 4.10%, 05/01/02 50,000 50,025 NORDDEUTSCHE LANDESBANK GIROZENTRALE 2.18%, 01/28/02 46,000 46,002 1.91%, 02/11/02 75,000 75,000 1.90%, 02/13/02 90,000 90,002 2.07%, 02/28/02 115,000 115,002 2.22%, 04/12/02 40,000 40,243 NORDEA BANK FINLAND, PLC 1.95%, 03/01/02 65,000 65,000 1.81%, 03/20/02 100,000 100,002 1.81%, 03/21/02 60,000 60,000 RABOBANK NEDERLAND, NV 2.36%, 01/03/03 100,000 99,955 1.80%, 03/25/02 25,000 25,000 4.43%, 04/02/02 47,000 47,015 4.04%, 07/08/02 100,000 100,003 ROYAL BANK OF CANADA 5.41%, 01/22/02 45,000 45,000 2.10%, 02/04/02 50,000 49,999 1.88%, 02/11/02 160,000 160,000 1.78%, 03/12/02 15,000 15,001 4.62%, 03/28/02 50,000 49,998
See the Financial Notes, which are integral to this information. 16
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) 4.47%, 04/12/02 46,000 45,998 4.64%, 04/18/02 70,000 70,000 4.05%, 07/08/02 100,000 99,997 3.88%, 07/23/02 100,000 99,989 3.80%, 07/26/02 6,000 6,001 4.02%, 08/07/02 75,000 74,998 ROYAL BANK OF SCOTLAND 3.90%, 07/29/02 45,000 44,995 2.56%, 09/25/02 92,000 92,000 3.67%, 10/04/02 98,000 97,993 2.74%, 12/27/02 99,000 98,981 SAN PAOLO IMI SPA 2.02%, 02/27/02 100,000 100,001 2.06%, 03/01/02 99,000 99,422 1.92%, 03/11/02 50,000 50,000 1.82%, 03/13/02 75,000 74,997 1.81%, 03/18/02 25,000 25,000 SOCIETE GENERALE 1.81%, 03/21/02 300,000 300,000 1.81%, 03/27/02 115,000 115,000 SVENSKA HANDELSBANKEN 1.89%, 02/11/02 25,000 25,089 1.77%, 03/11/02 70,000 70,001 1.78%, 03/12/02 95,000 95,002 1.77%, 03/22/02 50,000 50,001 1.78%, 03/22/02 25,000 25,147 TORONTO DOMINION BANK 2.05%, 01/04/02 160,000 160,000 2.47%, 01/06/03 46,000 46,000 1.95%, 02/15/02 24,000 24,000 1.75%, 03/13/02 100,000 100,000 1.81%, 03/26/02 30,000 30,000 1.81%, 03/27/02 200,000 200,000 4.65%, 04/18/02 30,000 30,000 2.05%, 11/12/02 50,000 50,000 2.50%, 12/17/02 50,000 50,009 UBS AG 2.43%, 01/06/03 50,000 50,000 2.44%, 01/06/03 47,000 47,005 1.86%, 03/06/02 51,000 51,000 1.90%, 03/12/02 160,000 160,002 1.89%, 03/14/02 200,000 200,002 3.82%, 07/19/02 140,000 139,989 3.81%, 07/23/02 210,000 209,989 2.40%, 11/20/02 100,000 99,991 UNICREDITO ITALIANO SPA 1.84%, 01/14/02 84,000 84,000 2.42%, 01/16/02 15,000 15,000 2.25%, 01/28/02 70,000 70,001 2.54%, 01/28/02 30,000 30,000 2.11%, 02/04/02 140,000 140,000 2.12%, 02/05/02 140,000 140,000 1.92%, 02/11/02 180,000 180,003 WESTDEUTSCHE LANDESBANK GIROZENTRALE 1.90%, 02/12/02 130,000 130,000 2.30%, 02/20/02 62,000 62,000 3.30%, 03/04/02 25,000 25,005 1.90%, 03/11/02 50,000 50,000 1.81%, 03/26/02 194,000 194,000 1.82%, 03/26/02 200,000 200,000 WILMINGTON TRUST CO. 1.81%, 03/25/02 25,000 25,000 ---------- 19,184,815 BANK NOTES 1.5% ---------------------------------------------------------------------------- BANK OF NEW YORK 4.50%, 03/28/02 25,000 24,999 2.22%, 04/11/02 50,000 50,291 2.48%, 10/17/02 93,000 92,989 LASALLE BANK, N.A. 2.08%, 02/06/02 128,000 128,000 4.50%, 03/28/02 27,000 26,999 WELLS FARGO BANK, N.A. 2.10%, 01/30/02 145,000 145,000 1.80%, 03/20/02 260,000 260,000 ---------- 728,278 PROMISSORY NOTES 1.4% ---------------------------------------------------------------------------- o THE GOLDMAN SACHS GROUP, INC. 3.80%, 01/14/02 80,000 80,000 2.60%, 01/31/02 135,000 135,000 3.54%, 02/21/02 200,000 200,000 2.00%, 03/06/02 146,000 146,000 2.00%, 06/04/02 75,000 75,000 1.93%, 06/12/02 70,000 70,000 ---------- 706,000
See the Financial Notes, which are integral to this information. 17 SCHWAB MONEY MARKET FUND - FINANCIALS PORTFOLIO HOLDINGS Continued As of December 31, 2001.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) VARIABLE-RATE OBLIGATIONS 2.0% of investments + 6700 CHERRY AVENUE PARTNERS Demand Bond Series 1993 2.23%, 01/07/02 9,300 9,300 * BETA FINANCE, INC., 144A 1.88%, 01/15/02 142,000 141,996 + CFM INTERNATIONAL, INC., 144A 2.10%, 01/07/02 33,005 33,005 + CITY OF SANTA ROSA VRD Wastewater Series 1998A 2.00%, 01/07/02 15,050 15,050 o GENERAL ELECTRIC LIFE & ANNUITY ASSURANCE CO., 144A 2.19%, 01/30/02 50,000 50,000 2.20%, 01/30/02 100,000 100,000 + LOANSTAR ASSETS PARTNERS II, L.P. 2.12%, 01/02/02 45,000 45,000 + LOWNDES CORP., GEORGIA Taxable Demand Bond Series 1997 2.05%, 01/07/02 6,600 6,600 + MERLOT TRUST Series 2000A, 144A 2.08%, 01/07/02 15,470 15,470 + MERLOT TRUST Series 2000B, 144A 2.08%, 01/07/02 32,630 32,630 + MERLOT TRUST Series 2001A,144A 2.08%, 01/07/02 35,065 35,065 o METROPOLITAN LIFE INSURANCE CO., 144A 2.19%, 01/30/02 50,000 50,000 o MONUMENTAL LIFE INSURANCE CO., 144A 2.25%, 01/02/02 100,000 100,000 MORGAN STANLEY, DEAN WITTER & CO., 144A 1.96%, 01/15/02 50,000 50,000 + NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY Adjustable Rate Lease Revenue Taxable Bonds (Barnes & Noble, Inc. Distribution & Freight Consolidation Center Project) Series 1995A 1.89%, 01/07/02 17,090 17,090 Adjustable Rate Lease Revenue Taxable Bonds (Barnes & Noble, Inc. Distribution & Freight Consolidation Center Project) Series B 1.89%, 01/07/02 10,000 10,000 Adjustable Rate Money Market Securities (GE Aerospace Camden Development Project) Series A 1.95%, 01/07/02 6,150 6,150 Adjustable Rate Money Market Securities (GE Aerospace Camden Development Project) Series B 1.95%, 01/07/02 10,000 10,000 o PACIFIC LIFE INSURANCE CO., 144A 2.19%, 01/02/02 100,000 100,000 * SIGMA FINANCE, INC., 144A 1.93%, 01/25/02 30,000 30,002 + SISTERS OF MERCY OF THE AMERICAS REGIONAL Community of Omaha, Nebraska Series 2001 1.93%, 01/07/02 11,860 11,860 *+ STRATEGIC MONEY MARKET TRUST Series 2001M,144A 1.90%, 03/13/02 15,000 15,000 + THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA (Bunker Hill Project) Subordinate Tax Allocation Refunding Bonds Series 1997A 2.10%, 01/07/02 10,000 10,000 o UNITED OF OMAHA LIFE INSURANCE CO., 144A 2.00%, 04/01/02 60,000 60,000 ---------- 954,218
See the Financial Notes, which are integral to this information. 18
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) FIXED-RATE - U.S. GOVERNMENT SECURITIES 1.8% of investments DISCOUNT NOTES 1.7% - ---------------------------------------------------------------------------- FANNIE MAE 2.00%, 01/31/02 400,000 399,337 FEDERAL HOME LOAN BANK 2.00%, 02/06/02 25,000 24,950 FREDDIE MAC 2.00%, 01/31/02 130,571 30,358 2.01%, 02/07/02 295,002 94,394 ---------- 849,039 COUPON NOTES 0.1% - ---------------------------------------------------------------------------- FEDERAL HOME LOAN BANK 6.75%, 05/01/02 60,000 60,873
OTHER INVESTMENTS 6.4% of investments
MATURITY VALUE MKT. VALUE SECURITY ($ X 1,000) ($ X 1,000) REPURCHASE AGREEMENTS 6.4% - ---------------------------------------------------------------------------- BANK OF AMERICA SECURITIES, L.L.C. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities 1.84%, issued 12/31/01, due 01/02/02 500,051 500,000 CREDIT SUISSE FIRST BOSTON CORP. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities 1.82%, issued 12/31/01, due 01/02/02 387,100 387,061 SALOMON SMITH BARNEY, INC. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities 1.82%, issued 12/31/01, due 01/02/02 360,036 360,000 UBS PAINEWEBBER, INC. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities 1.82%, issued 12/31/01, due 01/02/02 970,098 970,000 1.75%, issued 12/11/01, due 01/07/02 560,735 560,000 1.87%, issued 11/07/01, due 01/07/02 117,371 117,000 1.87%, issued 11/08/01, due 01/07/02 250,780 250,000 ---------- 3,144,061
- -------------------------------------------------------------------------------- END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for this fund. See the Financial Notes, which are integral to this information. 19 SCHWAB MONEY MARKET FUND - FINANCIALS Statement of ASSETS AND LIABILITIES As of December 31, 2001. All numbers x 1,000 except NAV.
ASSETS - ---------------------------------------------------------------------- Investments, at market value $ 49,047,732 a Interest receivable 173,410 Prepaid expenses + 1,925 -------------- TOTAL ASSETS 49,223,067 LIABILITIES - ---------------------------------------------------------------------- Payables: Dividends to shareholders 2,253 Investments bought 100,000 Investment adviser and administrator fees 1,138 Transfer agent and shareholder service fees 1,815 Accrued expenses + 2,064 -------------- TOTAL LIABILITIES 107,270 NET ASSETS - ---------------------------------------------------------------------- TOTAL ASSETS 49,223,067 TOTAL LIABILITIES - 107,270 -------------- NET ASSETS $ 49,115,797 NET ASSETS BY SOURCE Capital received from investors 49,115,873 Net realized capital losses (76)
NET ASSET VALUE(NAV) SHARES NET ASSETS / OUTSTANDING = NAV $49,115,797 49,116,405 $1.00 a Includes illiquid restricted securities worth $1,515,824, or 3.09% of the fund's investments. The amortized cost for the fund's securities was $49,047,732. FEDERAL TAX DATA - ---------------------------------------------------------------------- COST BASIS OF PORTFOLIO $ 49,047,732 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2003 $27 2007 + 49 ------------ $76
See the Financial Notes, which are integral to this information. 20 Statement of OPERATIONS For January 1, 2001 through December 31, 2001. All numbers x 1,000.
INVESTMENT INCOME - ------------------------------------------------------------------------ Interest $2,027,480 NET REALIZED GAINS - ------------------------------------------------------------------------ Net realized gains on investments sold 31 EXPENSES - ------------------------------------------------------------------------ Investment adviser and administrator fees 145,002 a Transfer agent and shareholder service fees 208,488 b Trustees' fees 138 c Custodian and portfolio accounting fees 3,377 Professional fees 185 Registration fees 2,920 Shareholder reports 3,698 Other expenses + 193 ------------ Total expenses 364,001 Expense reduction - 16,521 d ------------ NET EXPENSES 347,480 INCREASE IN NET ASSETS FROM OPERATIONS - ------------------------------------------------------------------------ TOTAL INVESTMENT INCOME 2,027,480 NET EXPENSES - 347,480 ------------ NET INVESTMENT INCOME 1,680,000 NET REALIZED GAINS + 31 ------------ INCREASE IN NET ASSETS FROM OPERATIONS $1,680,031
a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. Prior to June 1, 2001, these percentages were 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion and 0.30% over $20 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.25% of the fund's assets; for shareholder services, 0.20% of the fund's assets. c For the fund's independent trustees only. d This reduction was made by the investment adviser (CSIM). It reflects a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the operating expenses of this fund through at least April 30, 2002 to 0.75% of average daily net assets. This limit doesn't include interest, taxes and certain non-routine expenses. See the Financial Notes, which are integral to this information. 21 SCHWAB MONEY MARKET FUND -- FINANCIALS Statements of CHANGES IN NET ASSETS For the current and prior reporting periods. All numbers x 1,000.
OPERATIONS - ------------------------------------------------------------------------ 1/1/01-12/31/01 1/1/00-12/31/00 Net investment income $1,680,000 $2,233,306 Net realized gains + 31 62 --------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 1,680,031 2,233,368 DISTRIBUTIONS PAID - ------------------------------------------------------------------------ Dividends from net investment income $1,680,000 $2,233,306 TRANSACTIONS IN FUND SHARES a - ------------------------------------------------------------------------ Shares sold 141,136,281 184,154,775 Shares reinvested 1,653,875 2,185,595 Shares redeemed + (135,497,141) (180,616,417) --------------------------------- NET INCREASE 7,293,015 5,723,953 NET ASSETS - ------------------------------------------------------------------------ Beginning of period 41,822,751 36,098,736 Total increase + 7,293,046 5,724,015 b --------------------------------- END OF PERIOD $ 49,115,797 $ 41,822,751
a Because all transactions in this section took place at $1.00 a share, figures for share quantities are the same as for dollars. b Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. See the Financial Notes, which are integral to this information. 22 SCHWAB GOVERNMENT MONEY FUND [PHOTO OF KAREN WIGGAN] "Government agencies continued to redeem callable securities during 2001, replacing them with lower-yielding securities." Portfolio Manager Karen Wiggan KAREN WIGGAN, a portfolio manager, has been responsible for day-to-day management of the fund since 1999. She joined the firm in 1987 and has been working in fixed income portfolio management for over seven years. TICKER SYMBOL SWGXX - -------------------------------------------------------------------------------- The fund seeks the highest current income consistent with stability of capital and liquidity. - -------------------------------------------------------------------------------- This fund may make sense for investors who are looking for high money market returns along with the added margin of safety provided of U.S. government securities. MANAGER'S PERSPECTIVE THE YEAR 2001 WAS ONE OF THE MOST DIFFICULT FOR FINANCIAL MARKETS IS RECENT MEMORY. Stock prices tumbled and the economy contracted, with further damage done by the events of September 11. Seeking to revitalize the economy, the Fed launched an unprecedented series of rate cuts that spanned the entire year, ultimately bringing the Federal Funds target rate to 1.75%, a 40-year low. THE SUPPLY OF U.S. GOVERNMENT DISCOUNT NOTES REMAINED STRONG FOLLOWING THE SEPTEMBER ATTACKS. Government agencies continued to redeem callable securities with high interest rates and refinance them with lower yielding short-term instruments. Anticipating economic weakness and declining interest rates, we invested in securities with longer maturities. Throughout the year, the fund maintained a dollar-weighted average maturity that was longer than that of the fund's peer group. This strategy enabled the fund to lock in yields for longer periods, which benefited the fund as yields continued to decline over the course of the year. EXPECTATIONS OF AN ECONOMIC RECOVERY IN 2002 ARE GAINING MOMENTUM. A stronger economy is likely to lead to a rise in interest rates and yields. As a result, we have begun to shorten our dollar-weighted average maturity, enhancing the fund's ability to benefit from increases in interest rates. 23 SCHWAB GOVERNMENT MONEY FUND PERFORMANCE AND FUND FACTS SEVEN-DAY YIELDS 1 as of 12/31/01 The seven-day yields are calculated using standard SEC formulas. The effective yield includes the effect of reinvesting daily dividends. Please remember that money market fund yields fluctuate, and that past performance is not an indication of future results. - -------------------------------------------------------------------------------- Seven-Day Yield 1.67% - -------------------------------------------------------------------------------- Seven-Day Effective Yield 1.69% - --------------------------------------------------------------------------------
WEIGHTED AVERAGE MATURITY DURING THE YEAR Money Funds must maintain a dollar-weighted average maturity of no longer than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months). [LINE GRAPH] 31-Dec-00 47 31-Jan-01 46 28-Feb-01 49 30-Mar-01 58 30-Apr-01 64 31-May-01 59 30-Jun-01 55 31-Jul-01 60 31-Aug-01 59 28-Sep-01 57 31-Oct-01 54 30-Nov-01 54 31-Dec-01 56
PORTFOLIO COMPOSITION 2 as of 12/31/01 All figures are shown as a percentage of the fund's investments. All of the fund's securities were in the top tier of credit quality at the time of purchase. BY SECURITY TYPE - ------------------------------------------------------------- [PIE CHART] 1. 49.3% U.S. Government Discount Notes 2. 43.2% Repurchase Agreements 3. 6.5% U.S. Government Coupon Notes 4. 1.0% U.S. Government Variable-Rate Obligations
BY CREDIT QUALITY - ------------------------------------------------------------- [PIE CHART] 1. 100.0% Tier 1
1 A portion of the fund's expenses was reduced during the reporting period. Without this reduction, the fund's yields would have been lower. 2 Composition of the fund's portfolio is as of 12/31/01 and is not indicative of holdings after that date. 24 SCHWAB GOVERNMENT MONEY FUND -- FINANCIALS FINANCIAL TABLES These pages provide additional data on the fund's performance, portfolio holdings, expenses and business operations. These figures have been audited by PricewaterhouseCoopers LLP. Two other sections of this report provide context for the data in these financials. The FINANCIAL NOTES section contains information about the fund's business structure, accounting practices and other matters, completing the data given in these tables. The final section, HOW TO READ THIS REPORT, includes guides designed to make the financials easy to read and understand. FINANCIAL HIGHLIGHTS 1/1/01- 1/1/00- 1/1/99- 1/1/98- 1/1/97- 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 - ----------------------------------------------------------------------------------------------- PER-SHARE DATA ($) - ----------------------------------------------------------------------------------------------- Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ------------------------------------------------- Income from investment operations: Net investment income 0.04 0.06 0.04 0.05 0.05 ------------------------------------------------- Less distributions: Dividends from net investment income (0.04) (0.06) (0.04) (0.05) (0.05) ------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ================================================= Total return (%) 3.63 5.69 4.50 4.88 4.95 RATIOS/SUPPLEMENTAL DATA (%) - ----------------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.75 0.75 1 0.75 0.75 0.75 Expense reductions reflected in above ratio 0.09 0.09 0.10 0.17 0.17 Ratio of net investment income to average net assets 3.52 5.54 4.42 4.76 4.84 Net assets, end of period ($ x 1,000,000) 3,054 2,509 2,545 2,207 1,982
1 Would have been 0.76% if certain non-routine expenses (proxy fees) had been included. See the Financial Notes, which are integral to this information. 25 SCHWAB GOVERNMENT MONEY FUND -- FINANCIALS PORTFOLIO HOLDINGS As of December 31, 2001. This section shows all the securities in the fund's portfolio and their market value, as of the report date. For fixed-rate obligations, the rate shown is the effective yield at the time of purchase, except for U.S. government coupon notes and U.S. Treasury notes, for which the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date. The pie chart below shows the fund's major categories and the market value and cost of the securities in each category. For definitions of abbreviations and acronyms used in security descriptions, see "portfolio terms" in the glossary (in "How to Read This Report"). ALL DOLLAR VALUES ARE IN THOUSANDS. [PIE CHART] 55.8% FIXED-RATE - U.S. GOVERNMENT SECURITIES Market Value: $1,702,300 Cost: $1,702,300 1.0% VARIABLE-RATE - U.S. GOVERNMENT SECURITIES Market Value: $30,000 Cost: $30,000 43.2% OTHER INVESTMENTS Market Value: $1,316,394 Cost: $1,316,394 - --------------------------------------------------- 100.0% TOTAL INVESTMENTS Market Value: $3,048,694 Cost: $3,048,694
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) FIXED-RATE - U.S. GOVERNMENT SECURITIES 55.8% of Investments DISCOUNT NOTES 49.3% - -------------------------------------------------------------------------------- FANNIE MAE 2.67%, 01/03/02 15,000 14,998 2.30%, 01/10/02 25,000 24,986 3.21%, 01/10/02 30,000 29,976 4.54%, 01/11/02 5,000 4,994 1.85%, 01/24/02 12,000 11,986 2.12%, 01/24/02 25,000 24,966 3.54%, 01/24/02 25,000 24,944 2.05%, 01/31/02 45,000 44,924 3.21%, 01/31/02 24,000 23,937 1.88%, 02/07/02 20,000 19,962 1.86%, 02/14/02 17,471 17,431 3.40%, 02/14/02 20,000 19,918 4.43%, 02/22/02 23,000 22,858 3.22%, 03/07/02 8,000 7,954 2.33%, 03/14/02 15,201 15,131 4.28%, 03/20/02 25,000 24,777 1.76%, 03/21/02 5,000 4,981 2.03%, 04/25/02 20,000 19,873 1.80%, 05/16/02 20,000 19,866 3.93%, 05/31/02 20,575 20,251 3.53%, 08/09/02 8,809 8,625 1.99%, 09/20/02 40,000 39,429 2.28%, 11/01/02 12,000 11,774 2.42%, 11/15/02 15,000 14,687 2.22%, 11/29/02 22,000 21,560 2.25%, 11/29/02 15,000 14,696 2.24%, 12/13/02 17,000 16,642 FEDERAL HOME LOAN BANK 1.69%, 01/09/02 28,430 28,419 1.75%, 01/11/02 25,000 24,988 3.41%, 01/16/02 8,065 8,054 2.23%, 01/18/02 20,000 19,979 1.80%, 01/25/02 36,000 35,957 2.01%, 02/01/02 15,000 14,974 2.00%, 02/06/02 40,000 39,920 1.86%, 02/12/02 22,000 21,953 3.35%, 02/22/02 15,000 14,929 FREDDIE MAC 5.23%, 01/03/02 25,000 24,993 1.70%, 01/08/02 25,000 24,992 1.80%, 01/09/02 25,000 24,990
See the Financial Notes, which are integral to this information. 26
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) 1.76%, 01/15/02 47,595 47,562 2.06%, 01/17/02 13,000 12,988 2.14%, 01/17/02 10,325 10,315 2.28%, 01/17/02 25,000 24,975 2.27%, 01/25/02 20,873 20,842 2.68%, 01/30/02 25,000 24,947 2.02%, 02/07/02 45,000 44,907 2.26%, 02/08/02 29,224 29,155 1.98%, 02/14/02 17,000 16,959 4.51%, 02/20/02 12,000 11,928 1.91%, 02/21/02 12,799 12,765 1.70%, 02/28/02 15,000 14,959 4.83%, 02/28/02 30,000 29,777 1.76%, 03/01/02 30,000 29,914 1.76%, 03/07/02 18,000 17,943 1.81%, 03/07/02 45,000 44,854 2.02%, 03/15/02 20,000 19,919 2.39%, 03/15/02 16,026 15,949 4.37%, 03/28/02 25,000 24,750 4.56%, 03/28/02 30,000 29,688 3.74%, 04/19/02 10,000 9,891 1.98%, 04/25/02 20,000 19,876 2.05%, 04/25/02 12,200 12,122 4.04%, 05/01/02 15,000 14,806 3.75%, 06/20/02 20,000 19,659 3.83%, 06/26/02 15,000 14,729 3.74%, 07/01/02 7,000 6,873 3.71%, 07/18/02 26,567 26,044 3.74%, 07/18/02 14,900 14,605 2.44%, 10/10/02 25,000 24,534 2.37%, 11/07/02 12,000 11,760 2.44%, 11/07/02 10,000 9,795 2.17%, 12/05/02 25,000 24,502 ---------- 1,504,566 COUPON NOTES 6.5 - ------------------------------------------------------------------------------ FANNIE MAE 7.55%, 04/22/02 21,000 21,199 6.75%, 08/15/02 25,000 25,457 6.25%, 11/15/02 10,190 10,511 FEDERAL FARM CREDIT BANK 2.25%, 11/01/02 10,000 9,994 6.25%, 12/02/02 15,000 15,524 FEDERAL HOME LOAN BANK 5.25%, 01/23/02 30,000 30,009 5.25%, 04/25/02 24,500 24,581 6.75%, 05/01/02 45,000 45,460 STUDENT LOAN MORTGAGE ASSOCIATION 3.75%, 07/01/02 15,000 14,999 ---------- 197,734 VARIABLE-RATE - U.S. GOVERNMENT SECURITIES 1.0% of Investments COUPON NOTES 1.0% - ------------------------------------------------------------------------------- STUDENT LOAN MORTGAGE ASSOCIATION 1.93%, 01/02/02 30,000 30,000
OTHER INVESTMENTS 43.2% of Investments
MATURITY VALUE MKT. VALUE SECURITY ($ X 1,000) ($ X 1,000) REPURCHASE AGREEMENTS 43.2% - ------------------------------------------------------------------------------- BANK OF AMERICA SECURITIES, L.L.C. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities 1.84%, issued 12/31/01, due 01/02/02 148,015 148,000 CREDIT SUISSE FIRST BOSTON CORP. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities 1.82%, issued 12/31/01, due 01/02/02 148,409 148,394 2.35%, issued 10/05/01, due 01/04/02 25,149 25,000 2.02%, issued 11/06/01, due 01/07/02 45,157 45,000 MORGAN STANLEY & CO. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities 1.74%, issued 12/10/01, due 01/07/02 25,034 25,000 2.28%, issued 10/18/01, due 01/07/02, 30,154 30,000 2.29%, issued 10/16/01, due 01/07/02 40,211 40,000
See the Financial Notes, which are integral to this information. 27 SCHWAB GOVERNMENT MONEY FUND - FINANCIALS PORTFOLIO HOLDINGS Continued As of December 31, 2001.
MATURITY VALUE MKT. VALUE SECURITY ($ X 1,000) ($ X 1,000) SALOMON SMITH BARNEY, INC. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities 1.80%, issued 12/19/01, due 01/07/02 35,033 35,000 1.81%, issued 12/05/01, due 01/07/02 40,066 40,000 1.81%, issued 12/18/01, due 01/07/02 35,035 35,000 2.13%, issued 10/30/01, due 01/07/02 30,122 30,000 2.15%, issued 10/29/01, due 01/07/02 35,146 35,000 2.19%, issued 10/26/01, due 01/07/02 30,133 30,000 2.20%, issued 10/25/01, due 01/07/02 30,136 30,000 UBS PAINEWEBBER, INC. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities 1.82%, issued 12/31/01, due 01/02/02 350,035 350,000 1.75%, issued 12/11/01, due 01/07/02 25,033 25,000 1.81%, issued 12/27/01, due 01/07/02 25,014 25,000 1.87%, issued 11/08/01, due 01/07/02 40,125 40,000 1.93%, issued 11/09/01, due 01/07/02 40,127 40,000 1.96%, issued 11/15/01, due 01/07/02 30,087 30,000 2.00%, issued 11/16/01, due 01/07/02 20,058 20,000 2.08%, issued 11/02/01, due 01/07/02 25,095 25,000 2.09%, issued 11/01/01, due 01/07/02 45,175 45,000 2.22%, issued 10/24/01, due 01/07/02 20,093 20,000 ---------- 1,316,394
- -------------------------------------------------------------------------------- END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for this fund. See the Financial Notes, which are integral to this information. 28 Statement of ASSETS AND LIABILITIES As of December 31, 2001. All numbers x 1,000 except NAV.
ASSETS - ---------------------------------------------------------------- Investments, at market value $ 1,732,300 a Repurchase agreements, at market value 1,316,394 a Interest receivable 5,247 Prepaid expenses + 75 ------------ TOTAL ASSETS 3,054,016 LIABILITIES - ---------------------------------------------------------------- Payables: Dividends to shareholders 102 Investment adviser and administrator fees 66 Transfer agent and shareholder service fees 113 Accrued expenses + 203 ------------ TOTAL LIABILITIES 484 NET ASSETS - ---------------------------------------------------------------- TOTAL ASSETS 3,054,016 TOTAL LIABILITIES - 484 ------------ NET ASSETS 3,053,522 NET ASSETS BY SOURCE Capital received from investors 3,054,471 Net realized capital losses (939)
NET ASSETS VALUE (NAV) SHARES NET ASSETS / OUTSTANDING = NAV $3,053,532 3,054,627 $1.00 a The amortized cost for the fund's securities was $3,048,694. FEDERAL TAX DATA - ------------------------------------------------------------------------------- COST BASIS OF PORTFOLIO $ 3,048,694 RECLASSIFICATIONS: Net realized capital losses $53 Reclassified as: Capital received from investors ($53) UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2002 74 2003 161 2004 162 2005 226 2006 119 2007 184 2008 + 13 ------------ $939
See the Financial Notes, which are integral to this information. 29 Statement of OPERATIONS For January 1, 2001 through December 31, 2001. All numbers x 1,000.
INVESTMENT INCOME - ------------------------------------------------------------- Interest $120,644 EXPENSES - ------------------------------------------------------------- Investment adviser and administrator fees 10,195 a Transfer agent and shareholder service fees 12,722 b Trustees' fees 25 c Custodian and portfolio accounting fees 318 Professional fees 34 Registration fees 266 Shareholder reports 221 Other expenses + 20 ---------- Total expenses 23,801 Expense reduction - 2,597 d ---------- NET EXPENSES 21,204 INCREASE IN NET ASSETS FROM OPERATIONS - ------------------------------------------------------------- TOTAL INVESTMENT INCOME 120,644 NET EXPENSES - 21,204 ---------- NET INVESTMENT INCOME 99,440 ---------- INCREASE IN NET ASSETS FROM OPERATIONS $ 99,440
a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. Prior to June 1, 2001, these percentages were 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion and 0.30% over $20 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.25% of the fund's assets; for shareholder services, 0.20% of the fund's assets. c For the fund's independent trustees only. d This reduction was made by the investment adviser (CSIM). It reflects a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the operating expenses of this fund through at least April 30, 2002 to 0.75% of average daily net assets. This limit doesn't include interest, taxes and certain non-routine expenses. See the Financial Notes, which are integral to this information. 30 Statements of CHANGES IN NET ASSETS For the current and prior reporting periods. All numbers x 1,000.
OPERATIONS - -------------------------------------------------------------------------------- 1/1/01 - 12/31/01 1/1/00 - 12/31/00 Net investment income $ 99,440 $ 138,851 Net realized losses + -- (6) --------------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 99,440 138,845 DISTRIBUTIONS PAID - -------------------------------------------------------------------------------- Dividends from net investment income $ 99,440 $ 138,851 TRANSACTIONS IN FUND SHARES a - -------------------------------------------------------------------------------- Shares sold 7,798,623 9,101,323 Shares reinvested 98,149 136,330 Shares redeemed + (7,351,773) (9,274,256) --------------------------------------- NET INCREASE OR DECREASE 544,999 (36,603) NET ASSETS - -------------------------------------------------------------------------------- Beginning of period 2,508,533 2,545,142 Total increase or decrease + 544,999 (36,609) b --------------------------------------- END OF PERIOD $3,053,532 $2,508,533
a Because all transactions in this section took place at $1.00 a share, figures for share quantities are the same as for dollars. b Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. See the Financial Notes, which are integral to this information. 31 SCHWAB U.S. TREASURY MONEY FUND [PHOTO OF KAREN WIGGAN] "Short-term Treasuries provided a safe place for investors during a difficult year." Portfolio Manager Karen Wiggan KAREN WIGGAN, a portfolio manager, has been responsible for day-to-day management of the fund since 1999. She joined the firm in 1987 and has been working in fixed income portfolio management for over seven years. TICKER SYMBOL SWUXX - ------------------------------------------------------------------------------- The fund seeks the highest current income consistent with stability of capital and liquidity. - ------------------------------------------------------------------------------- WITH ITS PORTFOLIO OF SECURITIES BACKED BY THE FULL FAITH AND CREDIT OF THE U.S. GOVERNMENT, THIS FUND IS DESIGNED TO PROVIDE INVESTORS WITH THE HIGHEST DEGREE OF SAFETY OF ALL THE SCHWAB MONEY FUNDS, AS WELL AS CURRENT MONEY MARKET RETURNS. MANAGER'S PERSPECTIVE THE YEAR 2001 WAS ONE OF THE MOST DIFFICULT FOR FINANCIAL MARKETS IN RECENT MEMORY. Stock prices tumbled and the economy contracted, with further damage done by the events of September 11. Seeking to revitalize the economy, the Fed launched an unprecedented series of rate cuts that spanned the entire year, ultimately bringing the Federal Funds target rate to 1.75%, a 40-year low. THE TREASURY MARKET CONTINUED TO PROVIDE A SAFE HAVEN FOR INVESTORS DURING THIS VOLATILE PERIOD. Since the Fed's rate cuts were widely anticipated, especially in the beginning of the reporting period, we invested in securities that were at the longer end of the fund's permissible maturity limit, thereby allowing the fund to lock in higher yields in a declining rate environment. During the middle of the year, we began to rein in our average weighted maturity as potential economic stimulus packages began to take shape in Washington. However, September 11 set the economy back further, and we again extended the fund's maturity as rates appeared to be headed downward again. Throughout the year, the fund's weighted average maturity was slightly longer than that of its peer group. EXPECTATIONS OF AN ECONOMIC RECOVERY IN 2002 ARE GAINING MOMENTUM. A stronger economy is likely to lead to a rise in interest rates and yields. As a result, we have begun to shorten our dollar-weighted average maturity, enhancing the fund's ability to benefit from increases in interest rates. 32 PERFORMANCE AND FUND FACTS SEVEN-DAY YIELDS 1 as of 12/31/01 The seven-day yields are calculated using standard SEC formulas. The effective yield includes the effect of reinvesting daily dividends. Please remember that money market fund yields fluctuate, and that past performance is not an indication of future results. - -------------------------------------------------------------------------------- Seven-Day Yield 1.64% - -------------------------------------------------------------------------------- Seven-Day Effective Yield 1.66% - --------------------------------------------------------------------------------
WEIGHTED AVERAGE MATURITY during the year Money Funds must maintain a dollar-weighted average maturity of no longer than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months). [LINE GRAPH] 31-Dec-00 73 31-Jan-01 71 28-Feb-01 79 30-Mar-01 73 30-Apr-01 81 31-May-01 81 30-Jun-01 79 31-Jul-01 77 31-Aug-01 79 28-Sep-01 71 31-Oct-01 74 30-Nov-01 80 31-Dec-01 71
PORTFOLIO COMPOSITION 2 as of 12/31/01 All figures are shown as a percentage of the fund's investments. All of the fund's securities were in the top tier of credit quality at the time of purchase. BY SECURITY TYPE - ------------------------------------------------------------------------------- [PIE CHART] 1. 91.7% U.S. Government Discount Notes 2. 8.3% U.S. Government Coupon Notes
BY CREDIT QUALITY - ------------------------------------------------------------------------------- [PIE CHART] 1. 100.0% Tier 1
1 A portion of the fund's expenses was reduced during the reporting period. Without this reduction, the fund's yields would have been lower. 2 Composition of the fund's portfolio is as of 12/31/01 and is not indicative of holdings after that date. 33 SCHWAB U.S. TREASURY MONEY FUND -- FINANCIALS FINANCIAL TABLES These pages provide additional data on the fund's performance, portfolio holdings, expenses and business operations. These figures have been audited by PricewaterhouseCoopers LLP. Two other sections of this report provide context for the data in these financials. The FINANCIAL NOTES section contains information about the fund's business structure, accounting practices and other matters, completing the data given in these tables. The final section, HOW TO READ THIS REPORT, includes guides designed to make the financials easy to read and understand. FINANCIAL HIGHLIGHTS
1/1/01- 1/1/00- 1/1/99- 1/1/98- 1/1/97- 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 - ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.04 0.05 0.04 0.05 0.05 ------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.04) (0.05) (0.04) (0.05) (0.05) ------------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 =============================================================================== Total return (%) 3.61 5.40 4.25 4.69 4.85 RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net operating expenses to average net assets 0.65 0.65 1 0.65 0.65 0.65 Expense reductions reflected in above ratio 0.19 0.19 0.21 0.26 0.28 Ratio of net investment income to average net assets 3.44 5.27 4.18 4.58 4.75 Net assets, end of period ($ x 1,000,000) 4,042 2,750 2,592 2,131 1,765
1 Would have been 0.66% if certain non-routine expenses (proxy fees) had been included. See the Financial Notes, which are integral to this information. 34 PORTFOLIO HOLDINGS As of December 31, 2001. This section shows all the securities in the fund's portfolio and their market value, as of the report date. For fixed-rate obligations, the rate shown is the effective yield at the time of purchase, except for U.S. government coupon notes and U.S. Treasury notes, for which the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date. The pie chart below shows the fund's major categories and the market value and cost of the securities in each category. For definitions of abbreviations and acronyms used in security descriptions, see "portfolio terms" in the glossary (in "How to Read This Report"). ALL DOLLAR VALUES ARE IN THOUSANDS. [PIE CHART] 100.0% FIXED-RATE -- U.S. GOVERNMENT SECURITIES Market Value: $4,035,302 Cost: $4,035,302 - --------------------------------------------------------- 100.0% TOTAL INVESTMENTS Market Value: $4,035,302 Cost: $4,035,302
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) FIXED-RATE - U.S. GOVERNMENT SECURITIES 100.0% of investments DISCOUNT NOTES 91.7% - -------------------------------------------------------------------------------- U.S. TREASURY BILLS 1.64%, 01/10/02 50,000 49,980 2.19%, 01/10/02 10,660 10,654 2.20%, 01/10/02 33,730 33,712 2.23%, 01/10/02 23,060 23,047 1.82%, 01/17/02 25,000 24,980 1.83%, 01/17/02 50,000 49,959 2.14%, 01/17/02 39,985 39,947 2.17%, 01/17/02 50,000 49,952 2.18%, 01/17/02 20,140 20,121 2.20%, 01/17/02 50,000 49,951 2.21%, 01/17/02 43,775 43,732 2.32%, 01/17/02 100,000 99,898 3.42%, 01/17/02 7,875 7,863 3.43%, 01/17/02 50,000 49,925 2.09%, 01/24/02 3,310 3,306 2.10%, 01/24/02 16,530 16,508 2.19%, 01/24/02 6,760 6,751 3.43%, 01/24/02 60,150 60,020 3.44%, 01/24/02 50,000 49,892 1.63%, 01/31/02 15,630 15,609 1.91%, 01/31/02 14,840 14,816 3.33%, 01/31/02 85,000 84,768 3.32%, 02/07/02 100,000 99,664 3.34%, 02/07/02 23,870 23,789 1.84%, 02/14/02 150,000 149,664 1.85%, 02/14/02 39,435 39,346 1.87%, 02/14/02 27,795 27,732 1.93%, 02/14/02 12,250 12,221 1.96%, 02/14/02 14,930 14,894 2.32%, 02/14/02 90,000 89,747 3.26%, 02/14/02 75,000 74,706 3.29%, 02/14/02 4,015 3,999 3.33%, 02/14/02 13,960 13,904 1.63%, 02/28/02 4,550 4,538 1.65%, 02/28/02 2,850 2,842 1.76%, 02/28/02 11,930 11,896 1.98%, 02/28/02 30,000 29,905 1.99%, 02/28/02 40,000 39,872 2.00%, 02/28/02 7,220 7,197 2.15%, 02/28/02 135,000 134,536 3.26%, 02/28/02 100,000 99,484 1.71%, 03/07/02 18,680 18,623
See the Financial Notes, which are integral to this information. 35 SCHWAB U.S. TREASURY MONEY FUND -- FINANCIALS PORTFOLIO HOLDINGS Continued As of December 31, 2001.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) - -------------------------------------------------------------------------------- 1.82%, 03/07/02 8,295 8,268 2.07%, 03/07/02 9,705 9,669 2.22%, 03/07/02 24,000 23,905 2.25%, 03/07/02 3,785 3,770 1.62%, 03/14/02 25,000 24,920 1.65%, 03/14/02 100,000 99,671 1.69%, 03/14/02 12,880 12,837 1.73%, 03/14/02 7,525 7,499 1.77%, 03/14/02 12,965 12,919 1.83%, 03/14/02 50,000 49,818 2.26%, 03/14/02 100,000 99,552 2.61%, 03/14/02 13,220 13,152 2.74%, 03/14/02 50,000 49,730 3.17%, 03/14/02 50,000 49,688 1.68%, 03/21/02 8,880 8,847 2.19%, 03/21/02 50,000 49,762 1.59%, 03/28/02 175,000 174,338 1.71%, 03/28/02 65,815 65,548 1.83%, 03/28/02 50,000 49,783 1.92%, 03/28/02 21,165 21,069 1.96%, 03/28/02 40,000 39,815 2.05%, 03/28/02 75,000 74,636 1.63%, 04/18/02 100,000 99,519 1.70%, 04/18/02 50,000 49,749 1.73%, 04/18/02 25,000 24,872 1.85%, 04/18/02 50,000 49,727 1.98%, 04/18/02 100,000 99,417 2.04%, 04/18/02 50,000 49,700 2.05%, 04/18/02 35,000 34,789 1.98%, 04/25/02 5,705 5,670 1.72%, 05/02/02 31,255 31,075 1.73%, 05/02/02 21,225 21,102 1.90%, 05/02/02 100,000 99,368 1.91%, 05/02/02 42,130 41,862 1.85%, 05/16/02 89,210 88,596 1.90%, 05/16/02 40,000 39,717 1.91%, 05/16/02 31,960 31,733 1.95%, 05/16/02 1,040 1,032 1.99%, 05/16/02 23,055 22,885 1.81%, 05/23/02 50,000 49,646 1.74%, 05/30/02 36,020 35,764 1.78%, 05/30/02 24,660 24,480 2.01%, 05/30/02 50,000 49,588 1.75%, 06/06/02 27,335 27,129 1.78%, 06/06/02 40,000 39,694 1.82%, 06/06/02 20,000 19,844 1.90%, 06/06/02 10,000 9,919 1.80%, 06/27/02 2,200 2,181 --------- 3,702,204 COUPON NOTES 8.3% - -------------------------------------------------------------------------------- U.S. TREASURY NOTES 6.25%, 01/31/02 135,015 135,296 6.38%, 01/31/02 70,000 70,161 6.25%, 02/28/02 14,730 14,801 6.50%, 02/28/02 50,000 50,339 6.63%, 03/31/02 18,170 18,311 6.63%, 04/30/02 40,395 41,044 5.75%, 11/30/02 3,050 3,146 --------- 333,098
- -------------------------------------------------------------------------------- END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for this fund. See the Financial Notes, which are integral to this information. 36 Statement of ASSETS AND LIABILITIES As of December 31, 2001. All numbers x 1,000 except NAV. ASSETS - ------------------------------------------------------------------------------ Investments, at market value $ 4,035,302 a Cash 5 Interest receivable 7,595 Prepaid expenses + 57 ------------- TOTAL ASSETS 4,042,959 LIABILITIES - ------------------------------------------------------------------------------ Payables: Dividends to shareholders 175 Investment adviser and administrator fees 58 Transfer agent and shareholder service fees 151 Accrued expenses + 223 ------------- TOTAL LIABILITIES 607 NET ASSETS - ------------------------------------------------------------------------------ TOTAL ASSETS 4,042,959 TOTAL LIABILITIES - 607 ------------- NET ASSETS $ 4,042,352 NET ASSETS BY SOURCE Capital received from investors 4,043,096 Net realized capital losses (744)
NET ASSET VALUE (NAV) SHARES NET ASSETS / OUTSTANDING = NAV $4,042,352 4,043,160 $1.00 FEDERAL TAX DATA - -------------------------------------------------------------------------------- COST BASIS OF PORTFOLIO $4,035,315 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2005 $ 62 2006 89 2007 + 580 ------------ $ 731
a The amortized cost for the fund's securities was $4,035,302. See the Financial Notes, which are integral to this information. 37 SCHWAB U.S. TREASURY MONEY FUND -- FINANCIALS Statement of OPERATIONS For January 1, 2001 through December 31, 2001. All numbers x 1,000. INVESTMENT INCOME - ------------------------------------------------------------------------------ Interest $130,784 NET REALIZED GAINS - ------------------------------------------------------------------------------ Net realized gains on investments sold 113 EXPENSES - ------------------------------------------------------------------------------ Investment adviser and administrator fees 11,491 a Transfer agent and shareholder service fees 14,389 b Trustees' fees 30 c Custodian and portfolio accounting fees 323 Professional fees 33 Registration fees 251 Shareholder reports 174 Other expenses + 19 ---------- Total expenses 26,710 Expense reduction - 5,926 d ---------- NET EXPENSES 20,784 INCREASE IN NET ASSETS FROM OPERATIONS - ------------------------------------------------------------------------------ TOTAL INVESTMENT INCOME 130,784 NET EXPENSES - 20,784 ---------- NET INVESTMENT INCOME 110,000 NET REALIZED GAINS + 113 ---------- INCREASE IN NET ASSETS FROM OPERATIONS $110,113
a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. Prior to June 1, 2001, these percentages were 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion and 0.30% over $20 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.25% of the fund's assets; for shareholder services, 0.20% of the fund's assets. c For the fund's independent trustees only. d This reduction was made by the investment adviser (CSIM). It reflects a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the operating expenses of this fund through at least April 30, 2002 to 0.65% of average daily net assets. This limit doesn't include interest, taxes and certain non-routine expenses. See the Financial Notes, which are integral to this information. 38 Statements of CHANGES IN NET ASSETS For the current and prior reporting periods. All numbers x 1,000.
OPERATIONS - ------------------------------------------------------------------------------ 1/1/01-12/31/01 1/1/00-12/31/00 Net investment income $ 110,000 $ 130,100 Net realized gains + 113 189 ---------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 110,113 130,289 DISTRIBUTIONS PAID - ------------------------------------------------------------------------------ Dividends from net investment income $ 110,000 $ 130,100 TRANSACTIONS IN FUND SHARES a - ------------------------------------------------------------------------------ Shares sold 9,616,410 9,250,769 Shares reinvested 108,428 127,697 Shares redeemed + (8,432,154) (9,220,848) ---------------------------------- NET INCREASE 1,292,684 157,618 NET ASSETS - ------------------------------------------------------------------------------ Beginning of period 2,749,555 2,591,748 Total increase + 1,292,797 157,807 b ---------------------------------- END OF PERIOD $ 4,042,352 $ 2,749,555
a Because all transactions in this section took place at $1.00 a share, figures for share quantities are the same as for dollars. b Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. See the Financial Notes, which are integral to this information. 39 SCHWAB VALUE ADVANTAGE MONEY FUND(R) [PHOTO OF LINDA KLINGMAN AND MIKE NEITZKE] "The Fed's unprecedented activity during the year led to much lower yields than in recent years, yet investors still turned to money funds for the safety they are designed to provide." Portfolio Managers Linda Klingman and Mike Neitzke LINDA KLINGMAN, a vice president of the investment advisor and senior portfolio manager, has overall responsibility for the management of the fund. She joined the firm in 1990 and has 15 years of experience managing money market funds. MIKE NEITZKE, a portfolio manager, has day-to-day responsibility for management of the fund. Prior to joining the firm in March 2001, he worked for more than 15 years in the financial industry as a portfolio manager. TICKER SYMBOL SWVXX - -------------------------------------------------------------------------------- The fund seeks the highest current income consistent with stability of capital and liquidity. - -------------------------------------------------------------------------------- THIS FUND MAY BE APPROPRIATE FOR INVESTORS INTERESTED IN HIGH MONEY MARKET RETURNS. MANAGERS' PERSPECTIVE SHORT-TERM INTEREST RATES DECLINED SHARPLY AND STEADILY THROUGHOUT 2001, PACED BY THE FED'S RATE CUTS. The Fed's 11 interest rate cuts, which began in January and continued into December, left the Federal Funds Rate at 1.75%, its lowest level in more than 40 years. These cuts had the direct effect of reducing yields for money fund investors. ANTICIPATING ECONOMIC WEAKNESS AND DECLINING INTEREST RATES, WE INVESTED IN SECURITIES WITH LONGER MATURITIES. Throughout the year, the fund maintained a dollar-weighted average maturity that was longer than that of its peer group. This enabled the fund to lock in yields for longer periods, which benefited the fund as yields continued to decline over the course of the year. While the fund has had to replace these securities with issues paying lower yields, this strategy enabled the fund to maintain competitive yields during a time of falling interest rates. EXPECTATIONS OF AN ECONOMIC RECOVERY IN 2002 ARE GAINING MOMENTUM. A stronger economy is likely to lead to a rise in interest rates and yields. As a result, we have begun to shorten our dollar-weighted average maturity, enhancing the fund's ability to benefit from increases in interest rates. 40 PERFORMANCE AND FUND FACTS SEVEN-DAY YIELDS 1 as of 12/31/01 The seven-day yields are calculated using standard SEC formulas. The effective yield includes the effect of reinvesting daily dividends. Please remember that money market fund yields fluctuate, and that past performance is not an indication of future results. Seven-Day Yield 1.89% Seven-Day Effective Yield 1.91%
SEVEN-DAY EFFECTIVE YIELDS This chart compares the fund's seven-day effective yield to that of the iMoney Net, Inc.'s Money Fund Average, and shows that the fund consistently outperformed the average taxable money fund during the reporting period. [LINE GRAPH]
Avg Fund 01/02/2001 6.50 6.04 01/09/2001 6.40 5.93 01/16/2001 6.32 5.81 01/23/2001 6.22 5.70 01/30/2001 6.15 5.62 02/06/2001 6.05 5.43 02/13/2001 5.95 5.32 02/20/2001 5.82 5.22 02/27/2001 5.77 5.15 03/06/2001 5.63 5.06 03/13/2001 5.48 4.97 03/20/2001 5.33 4.88 03/27/2001 5.24 4.70 04/03/2001 5.20 4.67 04/10/2001 5.12 4.57 04/17/2001 5.05 4.53 04/24/2001 4.96 4.39 05/01/2001 4.87 4.29 05/08/2001 4.74 4.19 05/15/2001 4.62 4.06 05/22/2001 4.48 3.88 05/29/2001 4.41 3.79 06/05/2001 4.32 3.76 06/12/2001 4.18 3.67 06/19/2001 4.09 3.60 06/26/2001 4.00 3.51 07/03/2001 3.93 3.45 07/10/2001 3.87 3.37 07/17/2001 3.79 3.31 07/24/2001 3.72 3.26 07/31/2001 3.67 3.23 08/07/2001 3.61 3.17 08/14/2001 3.56 3.14 08/21/2001 3.50 3.09 08/28/2001 3.43 3.02 09/04/2001 3.40 3.00 09/11/2001 3.36 2.97 09/18/2001 3.30 2.89 09/25/2001 3.14 2.61 10/02/2001 3.10 2.60 10/09/2001 2.95 2.40 10/16/2001 2.81 2.29 10/23/2001 2.72 2.19 10/30/2001 2.61 2.11 11/06/2001 2.51 2.03 11/13/2001 2.40 1.88 11/20/2001 2.31 1.80 11/27/2001 2.21 1.74 12/04/2001 2.14 1.70 12/11/2001 2.04 1.61 12/18/2001 1.98 1.53 12/25/2001 1.92 1.47 12/31/2001 1.89 1.46
- ----Schwab Value Advantage Money Fund ****iMoney Net, Inc.'s Money Fund Average3 PORTFOLIO COMPOSITION 2 as of 12/31/01 All figures are shown as a percentage of the fund's investments. All of the fund's securities were in the top tier of credit quality at the time of purchase. BY SECURITY TYPE - -------------------------------------------------------------------------------- [PIE CHART] 1. 48.1% Commercial Paper and Other Corporate Obligations 2. 38.3% Certificates of Deposit 3. 7.4% Repurchase Agreements 4. 2.2% Variable-Rate Obligations 5. 1.4% U.S. Government Discount Notes 6. 1.3% Promissory Notes 7. 1.3% Bank Notes
BY CREDIT QUALITY - -------------------------------------------------------------------------------- [PIE CHART] 1. 100.0% Tier 1
WEIGHTED AVERAGE MATURITY during the year Money Funds must maintain a dollar-weighted average maturity of no longer than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months). [LINE CHART] 31-Dec-00 66 31-Jan-01 60 28-Feb-01 61 30-Mar-01 61 30-Apr-01 58 31-May-01 58 30-Jun-01 66 31-Jul-01 63 31-Aug-01 66 28-Sep-01 65 31-Oct-01 66 30-Nov-01 67 31-Dec-01 63
1 A portion of the fund's expenses was reduced during the reporting period. Without this reduction, the fund's yields would have been lower. 2 Composition of the fund's portfolio is as of 12/31/01 and is not indicative of holdings after that date. 3 Source: iMoney Net, Inc. average seven-day effective net yield for the first-tier retail category of taxable money funds for each week in the period from 1/2/01 to 12/31/01. The weekly number of funds in the category ranged from 293 to 331. 41 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - FINANCIAL FINANCIAL TABLES These pages provide additional data on the fund's performance, portfolio holdings, expenses and business operations. These figures have been audited by PricewaterhouseCoopers LLP. Two other sections of this report provide context for the data in these financials. The Financial Notes section contains information about the fund's business structure, accounting practices and other matters, completing the data given in these tables. The final section, How to Read This Report, includes guides designed to make the financials easy to read and understand. FINANCIAL HIGHLIGHTS
1/1/01 - 1/1/00 - 1/1/99 - 1/1/98 - 1/1/97 - 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 - ------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) - ------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 -------------------------------------------------------- Income from investment operations: Net investment income 0.04 0.06 0.05 0.05 0.05 -------------------------------------------------------- Less distributions: Dividends from net investment income (0.04) (0.06) (0.05) (0.05) (0.05) -------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ======================================================== Total return (%) 4.05 6.22 5.01 5.35 5.40 RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------------------------ Ratio of net operating expenses to average net assets 0.43 0.40 1 0.40 0.40 0.40 Expense reductions reflected in above ratio 0.13 0.19 0.21 0.27 0.29 Ratio of net investment income to average net assets 3.92 6.07 4.91 5.21 5.28 Net assets, end of period ($ x 1,000,000) 44,247 36,319 27,265 22,196 13,662
1 Would have been 0.41% if certain non-routine expenses (proxy fees) had been included. See the Financial Notes, which are integral to this information. 42 PORTFOLIO HOLDINGS As of December 31, 2001. This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: * Asset-backed security + Credit-enhanced security o Illiquid restricted security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase, except for U.S. government coupon notes and U.S. Treasury notes, for which the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date. The pie chart below shows the fund's major categories and the market value and cost of the securities in each category. For definitions of abbreviations and acronyms used in security descriptions, see "portfolio terms" in the glossary (in "How to Read This Report"). ALL DOLLAR VALUES ARE IN THOUSANDS. [PIE CHART] 89.0% FIXED-RATE OBLIGATIONS Market Value: $39,426,361 Cost: $39,426,361 2.2% VARIABLE-RATE OBLIGATIONS Market Value: $987,693 Cost: $987,693 1.4% FIXED-RATE U.S. GOVERNMENT SECURITIES Market Value: $599,457 Cost: $599,457 7.4% OTHER INVESTMENTS Market Value: $3,292,860 Cost: $3,292,860 - ---------------------------------------------- 100.0% TOTAL INVESTMENTS Market Value: $44,306,371 Cost: $44,306,371
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) FIXED-RATE OBLIGATIONS 89.0% of investments COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS 48.1% - -------------------------------------------------------------------------------- AB SPINTAB 2.50%, 01/22/02 30,000 29,957 2.33%, 02/11/02 54,000 53,858 2.31%, 02/20/02 50,000 49,841 AMERICAN EXPRESS CREDIT CORP. 1.90%, 03/01/02 120,000 119,628 1.96%, 03/07/02 60,000 59,789 * AMSTERDAM FUNDING CORP. 2.11%, 01/02/02 10,000 9,999 2.13%, 01/02/02 63,000 62,996 2.13%, 01/07/02 75,000 74,974 2.14%, 01/07/02 100,000 99,965 1.85%, 01/08/02 57,000 56,980 1.82%, 01/09/02 50,000 49,980 1.85%, 01/09/02 21,000 20,991 1.95%, 01/10/02 80,000 79,961 1.82%, 01/11/02 100,000 99,950 2.25%, 01/25/02 25,000 24,963 1.78%, 03/13/02 25,000 24,913 1.84%, 03/21/02 72,000 71,711 ANZ (DELAWARE), INC. 1.77%, 03/11/02 80,000 79,730 * APRECO, INC. 2.05%, 01/10/02 100,000 99,949 2.13%, 01/16/02 49,000 48,957 2.06%, 01/24/02 15,000 14,980 1.86%, 03/15/02 15,000 14,944 * ASSET SECURITIZATION COOPERATIVE CORP. 2.11%, 01/02/02 45,000 44,997 2.11%, 01/03/02 31,230 31,226 2.05%, 01/10/02 35,000 34,982 1.90%, 01/16/02 42,000 41,967 *+ ATLANTIS ONE FUNDING CORP. 2.14%, 01/28/02 60,000 59,904 2.32%, 02/14/02 45,000 44,874 2.16%, 02/15/02 60,000 59,839 2.32%, 02/19/02 191,962 191,361 2.07%, 03/05/02 70,000 69,748 2.09%, 03/07/02 114,000 113,573 1.86%, 03/28/02 10,000 9,956 2.50%, 03/28/02 50,000 49,705 2.16%, 04/25/02 147,731 146,732
See the Financial Notes, which are integral to this information. 43 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - FINANCIAL PORTFOLIO HOLDINGS Continued As of December 31, 2001.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) 2.16%, 04/26/02 33,000 32,775 2.17%, 04/26/02 200,000 198,626 BANK OF NOVA SCOTIA 2.11%, 02/01/02 190,000 189,656 2.28%, 04/18/02 50,000 49,665 BARCLAYS U.S. FUNDING CORP. 1.95%, 02/14/02 110,000 109,739 * BARTON CAPITAL CORP. 2.11%, 01/02/02 27,623 27,621 1.98%, 01/04/02 57,202 57,193 *+ BAVARIA TRR CORP. 2.15%, 01/14/02 10,000 9,992 * BAVARIA UNIVERSAL FUNDING CORP. 3.80%, 01/09/02 18,149 18,134 1.96%, 02/07/02 10,000 9,980 1.95%, 02/12/02 26,279 26,220 2.09%, 02/20/02 47,276 47,139 2.12%, 02/27/02 19,612 19,547 2.09%, 02/28/02 10,000 9,967 1.94%, 03/04/02 31,000 30,897 2.32%, 04/02/02 14,000 13,919 2.47%, 04/02/02 35,000 34,784 2.35%, 04/04/02 10,000 9,940 2.26%, 04/18/02 29,000 28,808 2.32%, 04/19/02 30,000 29,794 2.26%, 04/22/02 23,000 22,842 BEAR STEARNS COMPANIES, INC. 2.16%, 02/11/02 120,000 119,706 2.22%, 02/22/02 10,000 9,968 2.23%, 02/28/02 185,000 184,341 2.23%, 03/01/02 105,000 104,620 1.80%, 03/21/02 35,000 34,863 * BETA FINANCE, INC. 2.21%, 01/28/02 21,000 20,965 2.21%, 01/29/02 20,000 19,966 2.18%, 01/30/02 9,500 9,483 2.14%, 01/31/02 30,000 29,947 2.15%, 02/01/02 94,000 93,827 2.06%, 02/08/02 10,000 9,978 1.93%, 02/11/02 47,500 47,396 1.93%, 02/13/02 40,000 39,908 3.36%, 03/11/02 17,500 17,389 2.16%, 04/23/02 66,000 65,562 2.16%, 04/29/02 13,500 13,406 * BETA FINANCE, INC., 144A 2.38%, 02/07/02 5,000 5,013 5.27%, 02/25/02 98,000 97,998 4.35%, 05/03/02 50,000 49,993 2.38%, 05/08/02 5,000 5,034 4.32%, 05/08/02 45,000 45,005 3.95%, 07/16/02 23,000 23,011 CBA (DELAWARE) FINANCE, INC. 1.91%, 02/13/02 50,000 49,887 1.96%, 02/15/02 50,000 49,878 1.76%, 03/13/02 100,000 99,655 * CC (USA), INC. 2.18%, 01/30/02 31,000 30,946 2.13%, 02/06/02 50,000 49,894 2.18%, 02/08/02 100,000 99,771 2.11%, 02/12/02 10,000 9,976 3.51%, 02/28/02 12,500 12,431 1.92%, 03/15/02 8,000 7,969 * CC (USA), INC., 144A 4.66%, 04/04/02 100,000 100,000 4.20%, 05/10/02 44,500 44,518 4.26%, 05/20/02 65,000 65,000 4.10%, 07/15/02 10,000 10,000 4.02%, 07/16/02 20,000 20,000 2.40%, 11/26/02 15,000 15,000 * CIESCO, LP 2.03%, 01/08/02 117,000 116,954 CITICORP 1.90%, 01/11/02 150,000 149,921 * CLIPPER RECEIVABLES CORP. 1.88%, 01/17/02 50,000 49,958 1.85%, 01/18/02 95,000 94,917 + COMISION FEDERAL DE ELECTRICIDAD, SA Series A 1.89%, 03/21/02 13,000 12,946 * CONCORD MINUTEMEN CAPITAL CO., L.L.C. Series A 1.92%, 02/07/02 55,000 54,892 2.14%, 02/07/02 100,000 99,781 2.33%, 02/14/02 61,000 60,828 3.44%, 02/20/02 6,165 6,136 1.83%, 03/11/02 33,000 32,885 2.34%, 04/05/02 63,000 62,620 * CORPORATE ASSET FUNDING CO., INC. 2.19%, 02/05/02 125,000 124,735 2.11%, 02/08/02 7,700 7,683 2.08%, 02/14/02 65,000 64,836
See the Financial Notes, which are integral to this information. 44
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) * CORPORATE RECEIVABLES CORP. 1.88%, 01/15/02 100,000 99,927 2.19%, 02/07/02 66,000 65,852 2.18%, 02/12/02 70,000 69,823 2.05%, 02/22/02 94,000 93,723 CREDIT SUISSE FIRST BOSTON, INC. 3.40%, 03/04/02 70,000 69,597 * CXC, INC. 2.27%, 01/25/02 90,000 89,864 2.03%, 02/12/02 40,000 39,906 2.08%, 02/22/02 80,000 79,761 * DAKOTA CP NOTES OF CITIBANK CREDIT CARD ISSUANCE TRUST 2.02%, 01/07/02 52,505 52,487 2.02%, 01/08/02 50,000 49,980 2.07%, 01/09/02 120,000 119,945 DANSKE CORP. 2.11%, 01/29/02 25,000 24,959 2.05%, 02/27/02 62,000 61,800 2.19%, 04/23/02 46,000 45,689 DEN NORSKE BANK ASA 2.06%, 02/22/02 80,000 79,763 2.17%, 02/25/02 74,000 73,756 1.76%, 03/13/02 28,000 27,903 DEUTSCHE BANK FINANCIAL, INC. 2.03%, 02/08/02 80,000 79,829 1.86%, 02/27/02 210,000 209,385 DEXIA DELAWARE L.L.C. 2.05%, 02/26/02 55,000 54,825 1.79%, 03/07/02 28,000 27,910 * DORADA FINANCE, INC. 2.36%, 01/22/02 21,000 20,971 2.26%, 01/29/02 29,000 28,949 2.22%, 01/30/02 15,000 14,973 2.84%, 03/11/02 15,000 14,920 2.33%, 04/15/02 44,000 43,708 2.26%, 04/23/02 30,000 29,792 * DORADA FINANCE, INC., 144A 2.38%, 02/20/02 5,000 5,019 4.32%, 05/10/02 160,000 160,000 4.26%, 05/20/02 28,000 28,000 3.94%, 07/19/02 20,000 20,002 3.96%, 07/19/02 19,000 18,998 * EDISON ASSET SECURITIZATION CORP., L.L.C. 2.07%, 02/15/02 12,000 11,969 *+ ENTERPRISE FUNDING CORP. 1.85%, 01/11/02 10,364 10,359 1.88%, 01/15/02 95,000 94,931 2.00%, 03/06/02 14,716 14,664 1.78%, 03/11/02 25,634 25,547 2.08%, 05/06/02 15,202 15,093 *+ FORRESTAL FUNDING MASTER TRUST 2.05%, 01/04/02 250,000 249,958 2.11%, 01/07/02 22,212 22,204 2.13%, 01/07/02 100,000 99,965 2.09%, 01/09/02 15,000 14,993 2.19%, 01/11/02 51,316 51,285 1.97%, 01/14/02 25,000 24,982 2.11%, 01/18/02 121,562 121,441 2.14%, 01/23/02 200,000 199,740 FORTIS FUNDING, L.L.C. 2.04%, 01/04/02 50,000 49,992 2.06%, 02/20/02 50,000 49,857 1.90%, 03/01/02 50,000 49,845 1.81%, 03/27/02 48,000 47,796 * GALAXY FUNDING, INC. 2.31%, 01/16/02 40,000 39,962 2.23%, 01/22/02 43,000 42,944 3.44%, 01/25/02 40,000 39,910 1.98%, 02/13/02 61,000 60,857 1.93%, 02/15/02 20,000 19,952 2.55%, 02/15/02 25,000 24,921 2.02%, 02/27/02 5,000 4,984 2.08%, 02/27/02 65,000 64,787 1.93%, 03/12/02 23,000 22,914 1.83%, 03/18/02 44,000 43,831 1.79%, 03/20/02 85,000 84,672 GE CAPITAL INTERNATIONAL FUNDING, INC. 1.90%, 02/06/02 65,000 64,877 2.31%, 02/12/02 150,000 149,599 2.29%, 02/14/02 70,000 69,806 2.23%, 02/20/02 38,000 37,883 1.78%, 03/08/02 114,000 113,630 2.32%, 03/14/02 150,000 149,310 1.79%, 03/15/02 65,000 64,765 GE FINANCIAL ASSURANCE HOLDINGS, INC. 2.08%, 02/15/02 12,000 11,969 1.83%, 03/20/02 75,000 74,704
See the Financial Notes, which are integral to this information. 45 SCHWAB VALUE ADVANTAGE MONEY FUND(R)--FINANCIALS PORTFOLIO HOLDINGS Continued As of December 31, 2001.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) GENERAL ELECTRIC CAPITAL CORP. 2.12%, 01/29/02 95,000 94,844 2.38%, 02/01/02 286,000 285,419 2.32%, 02/06/02 165,000 164,621 2.32%, 02/07/02 150,000 149,645 2.17%, 02/21/02 180,000 179,452 2.10%, 02/25/02 40,000 39,872 2.10%, 02/26/02 40,000 39,870 1.87%, 03/01/02 25,000 24,924 2.34%, 03/08/02 214,000 213,090 1.81%, 03/27/02 90,000 89,618 GENERAL ELECTRIC CAPITAL SERVICES 2.30%, 02/13/02 25,000 24,932 2.28%, 02/14/02 75,000 74,793 2.10%, 02/26/02 130,000 129,577 2.31%, 03/13/02 91,000 90,589 1.83%, 03/20/02 63,000 62,752 * GIRO FUNDING US CORP. 2.54%, 01/22/02 30,000 29,956 2.09%, 02/22/02 130,000 129,610 * GIRO MULTI FUNDING CORP. 1.98%, 01/07/02 17,265 17,259 1.90%, 01/22/02 110,000 109,870 2.15%, 01/30/02 30,169 30,117 2.18%, 01/30/02 5,644 5,634 1.97%, 03/28/02 60,000 59,719 GOLDMAN SACHS GROUP, INC. 3.04%, 03/13/02 315,000 313,139 *o GREENWICH FUNDING CORP. 2.11%, 01/02/02 10,000 9,999 1.96%, 01/09/02 120,000 119,948 2.58%, 01/11/02 95,000 94,932 1.77%, 03/08/02 89,000 88,713 * GREYHAWK FUNDING, L.L.C. 2.13%, 01/31/02 92,000 91,838 2.06%, 02/13/02 20,000 19,951 HALIFAX, PLC 2.31%, 02/11/02 100,000 99,739 2.24%, 02/19/02 32,000 31,903 *+ HALOGEN CAPITAL COMPANY, L.L.C. 2.33%, 01/14/02 10,000 9,992 2.34%, 01/14/02 40,000 39,966 2.62%, 01/14/02 35,000 34,967 2.34%, 01/17/02 100,112 100,009 * HATTERAS FUNDING CORP. 2.25%, 01/24/02 70,000 69,900 2.30%, 01/29/02 20,000 19,964 2.23%, 02/01/02 25,000 24,952 2.29%, 02/07/02 25,000 24,942 1.92%, 03/05/02 35,000 34,883 1.79%, 03/13/02 47,683 47,516 *+ INDEPENDENCE FUNDING, L.L.C. 1.85%, 01/11/02 50,000 49,975 1.89%, 02/25/02 112,000 111,678 1.83%, 03/22/02 18,071 17,998 J.P. MORGAN CHASE & CO. 2.24%, 01/23/02 300,000 299,591 2.00%, 02/19/02 200,000 199,458 2.00%, 02/20/02 350,000 349,033 2.00%, 02/21/02 200,000 199,436 * JUPITER SECURITIZATION CORP. 1.90%, 01/18/02 64,000 63,943 1.88%, 01/29/02 40,665 40,606 * K2 (USA), L.L.C. 2.88%, 01/18/02 10,000 9,987 3.62%, 01/29/02 51,000 50,859 3.44%, 01/30/02 25,000 24,932 3.50%, 02/07/02 26,000 25,908 2.63%, 02/15/02 15,000 14,951 3.49%, 02/15/02 13,500 13,442 2.63%, 02/26/02 15,000 14,939 3.78%, 02/27/02 14,500 14,415 2.33%, 03/04/02 30,000 29,881 2.34%, 03/04/02 44,000 43,824 2.33%, 03/15/02 11,000 10,949 3.50%, 03/15/02 25,000 24,826 2.48%, 03/22/02 18,000 17,902 2.33%, 03/25/02 9,500 9,449 2.65%, 03/26/02 12,008 11,935 2.33%, 04/15/02 13,000 12,914 2.36%, 04/16/02 14,500 14,401 2.32%, 04/17/02 3,000 2,980 2.26%, 04/22/02 15,500 15,393 2.32%, 04/22/02 28,000 27,802 3.49%, 04/23/02 17,500 17,314 2.52%, 04/26/02 23,000 22,818 2.09%, 05/22/02 10,000 9,919 1.92%, 06/17/02 20,000 19,824
See the Financial Notes, which are integral to this information. 46
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) *+ KITTY HAWK FUNDING CORP. 1.88%, 01/15/02 151,752 151,641 1.91%, 02/07/02 80,744 80,586 1.94%, 02/08/02 20,100 20,059 2.50%, 03/20/02 23,000 22,877 1.90%, 04/01/02 24,227 24,113 1.91%, 05/03/02 25,224 25,062 LANDESBANK SCHLESWIG-HOLSTEIN GIROZENTRALE 2.03%, 02/19/02 29,000 28,920 2.03%, 02/26/02 18,000 17,943 1.82%, 03/20/02 85,000 84,667 4.19%, 05/07/02 45,000 44,366 1.84%, 06/10/02 39,000 38,685 2.43%, 11/12/02 60,000 58,753 2.55%, 11/26/02 35,000 34,205 * LEXINGTON PARKER CAPITAL CORP. 2.32%, 01/17/02 50,000 49,949 2.33%, 01/17/02 20,296 20,275 3.65%, 01/23/02 31,064 30,996 3.66%, 01/23/02 2,000 1,996 3.53%, 01/24/02 20,000 19,956 3.65%, 01/25/02 170,000 169,594 2.14%, 02/05/02 50,561 50,456 3.49%, 03/01/02 75,848 75,422 * LINKS FINANCE, L.L.C. 3.62%, 01/23/02 25,000 24,946 1.94%, 03/06/02 10,000 9,966 2.32%, 03/25/02 33,000 32,825 2.32%, 03/27/02 50,000 49,728 2.33%, 04/11/02 22,000 21,859 2.11%, 04/15/02 13,937 13,853 2.16%, 04/29/02 4,000 3,972 2.04%, 05/13/02 30,000 29,778 LLOYDS TSB BANK, PLC 2.04%, 02/04/02 24,000 23,954 1.81%, 03/21/02 93,000 92,633 * MARKET STREET FUNDING CORP. 2.12%, 01/08/02 45,000 44,982 MORGAN STANLEY, DEAN WITTER & CO., INC. 1.84%, 02/13/02 150,000 149,672 1.84%, 02/25/02 90,000 89,748 2.00%, 02/26/02 100,000 99,690 * NEWCASTLE CERTIFICATES PROGRAM 2.09%, 01/15/02 90,000 89,927 2.11%, 01/24/02 100,000 99,866 2.13%, 01/29/02 85,000 84,860 NORDEA NORTH AMERICA, INC. 2.11%, 01/08/02 50,000 49,980 2.06%, 02/26/02 23,000 22,927 * PREFERRED RECEIVABLES FUNDING CORP. 2.11%, 01/11/02 112,185 112,120 2.23%, 01/25/02 15,000 14,978 2.13%, 02/05/02 15,000 14,969 PRUDENTIAL FUNDING, LLC 2.06%, 02/27/02 25,000 24,919 * QUINCY CAPITAL CORP. 2.03%, 01/04/02 45,000 44,992 2.10%, 01/09/02 35,000 34,984 *+ RECEIVABLES CAPITAL CORP. 1.99%, 01/03/02 45,146 45,141 2.13%, 01/11/02 27,609 27,593 SALOMON SMITH BARNEY HOLDINGS, INC. 1.95%, 01/02/02 25,000 24,999 SAN PAOLO IMI U.S. FINANCIAL CO. 2.06%, 01/31/02 93,000 92,841 2.11%, 01/31/02 27,000 26,953 1.90%, 02/12/02 30,000 29,934 1.91%, 02/13/02 100,000 99,773 2.07%, 02/26/02 30,000 29,904 2.06%, 02/27/02 50,000 49,838 SANTANDER FINANCIAL (DELAWARE), INC. 2.20%, 01/25/02 30,000 29,956 1.89%, 03/04/02 44,000 43,857 1.89%, 03/05/02 55,000 54,819 1.82%, 03/19/02 48,000 47,814 * SIGMA FINANCE, INC. 3.45%, 02/14/02 40,000 39,834 2.55%, 02/25/02 24,500 24,406 3.31%, 03/01/02 110,000 109,412 3.31%, 03/05/02 50,000 49,715 2.48%, 03/21/02 20,590 20,479 2.63%, 03/21/02 7,000 6,960 2.32%, 04/11/02 50,000 49,682 2.33%, 04/11/02 50,000 49,681 2.33%, 04/17/02 15,000 14,898 2.05%, 04/24/02 10,000 9,936 2.55%, 05/10/02 13,524 13,402 * SIGMA FINANCE, INC., 144A 4.80%, 04/25/02 10,000 10,000 4.20%, 05/15/02 20,000 19,993 4.06%, 06/17/02 46,000 46,008 3.77%, 08/02/02 100,000 100,000
See the Financial Notes, which are integral to this information. 47 SCHWAB VALUE ADVANTAGE MONEY FUND(R) -- FINANCIALS PORTFOLIO HOLDINGS Continued As of December 31, 2001.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) 3.74%, 08/06/02 100,000 100,000 3.37%, 09/16/02 65,000 65,126 3.37%, 09/20/02 50,000 50,091 2.83%, 09/25/02 10,000 10,000 2.31%, 11/15/02 90,000 89,767 SOCIETE GENERALE, N.A., INC. 2.36%, 02/11/02 12,000 11,968 2.30%, 02/12/02 20,000 19,947 2.01%, 02/28/02 165,000 164,468 1.78%, 03/05/02 110,000 109,659 1.89%, 03/06/02 114,000 113,619 1.90%, 03/06/02 150,000 149,496 * STELLAR FUNDING GROUP, INC. 2.01%, 01/02/02 11,922 11,921 2.29%, 01/16/02 6,000 5,994 2.23%, 01/22/02 25,215 25,182 2.29%, 01/22/02 24,766 24,733 2.13%, 01/23/02 15,000 14,981 1.94%, 01/28/02 15,000 14,978 2.13%, 01/28/02 10,760 10,743 2.19%, 01/28/02 15,776 15,750 2.19%, 01/29/02 15,206 15,180 2.40%, 02/12/02 20,000 19,944 2.11%, 02/15/02 9,000 8,976 2.53%, 03/20/02 20,454 20,343 2.53%, 03/21/02 9,867 9,813 1.87%, 03/28/02 7,860 7,825 2.53%, 03/28/02 17,274 17,171 2.34%, 04/10/02 12,000 11,924 2.17%, 04/16/02 8,949 8,893 2.21%, 04/17/02 18,682 18,562 SVENSKA HANDELSBANKEN, INC. 2.26%, 02/08/02 26,000 25,938 1.81%, 03/18/02 50,000 49,809 TORONTO DOMINION HOLDINGS, INC. 2.01%, 02/22/02 50,000 49,856 *+ TRIPLE-A ONE FUNDING CORP. 2.12%, 01/15/02 25,543 25,522 1.85%, 01/16/02 14,922 14,910 1.86%, 03/26/02 6,914 6,884 *+ TULIP FUNDING CORP. 1.95%, 01/15/02 77,513 77,454 2.33%, 02/08/02 19,000 18,954 2.30%, 03/18/02 28,417 28,281 1.86%, 03/20/02 11,772 11,725 TYCO CAPITAL CORP. 2.17%, 02/08/02 99,000 98,774 2.17%, 02/11/02 95,000 94,766 1.89%, 03/01/02 69,000 68,787 1.81%, 04/01/02 45,000 44,798 * VARIABLE FUNDING CAPITAL CORP. 2.10%, 01/03/02 265,000 264,969 2.11%, 01/03/02 98,000 97,989 1.97%, 01/07/02 50,000 49,984 2.11%, 01/07/02 75,000 74,974 1.90%, 02/07/02 150,000 149,709 * WCP FUNDING, INC. 2.19%, 02/06/02 73,000 72,841 * WINDMILL FUNDING 2.05%, 01/02/02 21,000 20,999 1.98%, 01/03/02 25,000 24,997 2.13%, 01/07/02 14,400 14,395 2.14%, 01/07/02 10,000 9,996 1.95%, 01/11/02 50,000 49,973 2.18%, 01/29/02 56,000 55,905 1.79%, 03/11/02 23,000 22,922 ---------- 21,309,768 CERTIFICATES OF DEPOSIT 38.3% - -------------------------------------------------------------------------------- ABBEY NATIONAL TREASURY SERVICES, PLC 2.05%, 02/05/02 55,000 55,000 2.05%, 02/06/02 70,000 70,000 2.01%, 02/22/02 255,000 255,000 3.88%, 07/23/02 195,000 195,003 ABN AMRO BANK, NV 1.81%, 03/27/02 100,000 100,000 AMERICAN EXPRESS CENTURION BANK 2.55%, 01/10/02 92,000 92,000 2.10%, 02/05/02 90,000 90,000 BANCO BILBAO VIZCAYA ARGENTARIA SA 1.76%, 03/14/02 25,000 25,001 BANK OF MONTREAL 1.90%, 03/11/02 69,000 69,000 BANK OF NOVA SCOTIA 2.30%, 02/11/02 47,000 47,001 1.90%, 02/13/02 65,000 65,000 1.95%, 02/15/02 100,000 100,000 2.00%, 02/20/02 25,000 25,000 2.06%, 02/27/02 100,000 100,000 1.92%, 03/05/02 25,000 25,000 1.77%, 03/12/02 45,000 45,000 1.89%, 03/12/02 25,000 25,000
See the Financial Notes, which are integral to this information. 48
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) BANK OF SCOTLAND TREASURY SERVICES, PLC 2.24%, 02/14/02 8,000 8,000 2.16%, 02/28/02 32,000 32,000 1.90%, 03/05/02 176,000 176,002 1.82%, 04/05/02 10,000 10,002 2.25%, 04/19/02 40,000 40,000 2.05%, 04/24/02 50,000 50,028 BARCLAYS BANK, PLC 2.05%, 01/16/02 146,000 145,996 2.10%, 01/22/02 335,000 335,001 1.78%, 03/11/02 47,000 47,011 2.05%, 04/09/02 45,000 45,287 4.43%, 04/10/02 50,000 50,000 2.15%, 04/26/02 20,000 20,003 BAYERISCHE HYPO-UND VEREINSBANK, AG 2.05%, 01/25/02 188,000 188,000 1.92%, 02/13/02 11,000 11,000 2.01%, 02/15/02 100,000 100,000 2.01%, 02/20/02 175,000 175,000 1.86%, 03/06/02 82,000 82,000 1.86%, 03/07/02 90,000 90,000 1.75%, 03/21/02 70,000 70,000 BAYERISCHE LANDESBANK GIROZENTRALE 2.11%, 02/01/02 181,200 181,203 2.05%, 02/25/02 34,000 33,999 1.87%, 03/06/02 20,000 20,000 2.05%, 04/04/02 80,000 80,075 4.53%, 04/11/02 83,000 82,969 4.53%, 04/12/02 55,000 55,000 BNP PARIBAS 2.32%, 02/04/02 191,000 191,000 2.32%, 02/05/02 250,000 250,000 1.89%, 02/13/02 125,000 125,001 1.86%, 03/08/02 95,000 95,000 1.75%, 03/14/02 35,000 35,000 1.82%, 03/19/02 50,000 50,001 2.22%, 03/25/02 130,000 130,000 CANADIAN IMPERIAL BANK OF COMMERCE 5.41%, 01/22/02 50,000 50,000 1.90%, 02/26/02 20,000 20,094 4.62%, 03/28/02 94,000 93,996 4.64%, 03/28/02 25,000 24,999 4.11%, 05/08/02 25,000 25,001 3.84%, 07/22/02 150,000 149,996 3.88%, 07/23/02 40,000 39,996 3.80%, 07/31/02 220,000 219,981 CHASE MANHATTAN BANK USA, N.A. 2.10%, 02/01/02 285,000 285,000 1.85%, 03/07/02 242,000 242,000 1.85%, 03/08/02 338,000 338,000 CITIBANK, N.A. 2.05%, 02/21/02 250,000 250,000 1.86%, 03/07/02 239,000 239,000 1.80%, 04/02/02 28,000 28,000 1.80%, 04/03/02 70,000 70,000 COMMERZBANK, AG 2.07%, 02/28/02 93,000 93,000 1.79%, 03/13/02 36,000 36,000 CREDIT AGRICOLE INDOSUEZ 2.06%, 02/05/02 75,000 75,004 2.30%, 02/19/02 199,000 199,000 1.75%, 03/18/02 90,000 90,000 CREDIT SUISSE FIRST BOSTON CORP. 2.41%, 01/25/02 95,000 95,004 DANSKE BANK A/S 1.84%, 02/27/02 48,000 48,000 2.32%, 03/11/02 25,000 25,000 1.89%, 03/14/02 20,000 20,000 DEUTSCHE BANK, AG 2.01%, 02/28/02 25,000 25,001 4.81%, 03/15/02 100,000 99,994 2.47%, 03/19/02 477,000 477,000 3.80%, 07/19/02 145,000 144,988 3.70%, 10/04/02 50,000 49,996 DRESDNER BANK, AG 2.19%, 01/28/02 45,000 45,002 2.07%, 03/05/02 70,000 70,000 1.91%, 03/06/02 30,000 30,000 1.89%, 03/14/02 100,000 100,000 1.80%, 03/18/02 35,000 35,000 FIRST TENNESSEE BANK, N.A. 2.21%, 01/28/02 50,000 50,000 FORENINGSSPARBANKEN AB (SWEDBANK) 1.81%, 03/21/02 50,000 50,000 HALIFAX, PLC 2.31%, 02/04/02 50,000 50,007 2.30%, 02/19/02 60,000 60,000 1.81%, 03/20/02 79,000 79,000 2.22%, 03/26/02 80,000 80,000 2.23%, 04/19/02 25,000 25,003 2.57%, 09/25/02 50,000 50,000
See the Financial Notes, which are integral to this information. 49 SCHWAB VALUE ADVANTAGE MONEY FUND(R) -- FINANCIALS PORTFOLIO HOLDINGS Continued As of December 31, 2001.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) ING BANK NV 1.91%, 02/11/02 49,000 49,000 2.06%, 02/28/02 87,000 87,000 1.97%, 03/04/02 170,000 170,000 1.89%, 03/05/02 73,000 73,000 1.90%, 03/11/02 75,000 75,000 1.77%, 03/14/02 140,000 140,000 1.77%, 03/15/02 140,000 140,000 1.77%, 03/18/02 75,000 75,000 1.82%, 03/19/02 250,000 250,000 1.83%, 03/25/02 40,000 40,000 1.83%, 03/28/02 64,000 64,000 J.P. MORGAN CHASE BANK 1.75%, 03/13/02 125,000 125,000 1.75%, 03/15/02 200,000 200,000 1.75%, 03/18/02 25,000 25,000 LANDESBANK BADEN WURTTEMBERG 2.02%, 02/19/02 120,000 120,001 2.06%, 02/28/02 75,000 75,001 1.81%, 03/21/02 49,000 49,001 1.81%, 03/22/02 60,000 60,001 1.84%, 03/28/02 71,000 71,000 2.05%, 04/29/02 50,000 50,023 LANDESBANK HESSEN-THURINGEN GIROZENTRALE 2.10%, 02/04/02 85,000 85,000 3.45%, 02/28/02 45,000 45,000 3.30%, 03/04/02 50,000 50,004 LLOYDS TSB BANK, PLC 1.91%, 02/14/02 100,000 100,000 1.87%, 03/04/02 49,000 49,000 1.75%, 03/11/02 100,000 100,000 1.75%, 03/13/02 120,000 120,000 1.80%, 03/21/02 50,000 50,000 1.80%, 03/26/02 122,000 122,000 NATIONAL AUSTRALIA BANK, LTD. 4.44%, 04/12/02 75,000 75,000 4.25%, 04/29/02 194,000 194,000 4.20%, 05/30/02 100,000 100,002 NATIONAL BANK OF CANADA 1.89%, 02/13/02 65,000 65,000 NATIONAL WESTMINSTER BANK, PLC 3.88%, 07/23/02 100,000 99,992 3.89%, 07/24/02 321,000 320,965 NORDDEUTSCHE LANDESBANK GIROZENTRALE 3.65%, 01/28/02 125,000 125,000 1.91%, 02/11/02 75,000 75,000 2.06%, 02/21/02 55,000 55,000 2.07%, 02/28/02 87,000 87,001 NORDEA BANK FINLAND, PLC 1.81%, 03/18/02 100,000 99,999 1.81%, 03/20/02 100,000 100,002 1.81%, 03/21/02 40,000 40,000 RABOBANK NEDERLAND, NV 2.36%, 01/03/03 86,000 85,962 1.80%, 03/25/02 15,000 15,000 4.43%, 04/02/02 48,000 48,016 4.04%, 07/08/02 98,000 98,002 ROYAL BANK OF CANADA 5.41%, 01/22/02 40,000 40,000 1.88%, 02/11/02 40,000 40,000 1.78%, 03/12/02 85,000 85,003 4.62%, 03/28/02 50,000 49,998 4.47%, 04/12/02 47,000 46,998 4.64%, 04/18/02 80,000 80,000 4.05%, 07/08/02 96,000 95,998 3.88%, 07/23/02 100,000 99,989 3.80%, 07/26/02 16,000 16,003 4.02%, 08/07/02 124,000 123,996 ROYAL BANK OF SCOTLAND 2.56%, 09/25/02 93,000 93,000 3.67%, 10/04/02 97,000 96,993 2.74%, 12/27/02 99,000 98,981 SAN PAOLO IMI SPA 1.90%, 03/05/02 18,000 18,001 1.81%, 03/18/02 25,000 25,000 SOCIETE GENERALE 2.11%, 02/01/02 140,000 140,000 2.10%, 02/04/02 80,000 80,000 1.81%, 03/21/02 50,000 50,000 SVENSKA HANDELSBANKEN 1.77%, 03/11/02 30,000 30,001 1.77%, 03/22/02 50,000 50,001 TORONTO DOMINION BANK 2.05%, 01/04/02 100,000 100,000 2.47%, 01/06/03 46,000 46,000 1.89%, 02/08/02 95,000 95,000 1.95%, 02/15/02 80,000 80,000 1.81%, 03/27/02 100,000 100,000 4.65%, 04/18/02 70,000 70,000 4.11%, 05/10/02 69,000 68,998 3.81%, 07/23/02 42,000 42,002
See the Financial Notes, which are integral to this information. 50
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) UBS AG 2.43%, 01/06/03 50,000 50,000 2.44%, 01/06/03 47,000 47,005 1.86%, 03/06/02 240,000 240,002 1.90%, 03/12/02 40,000 40,000 1.89%, 03/14/02 160,000 160,002 3.81%, 07/23/02 145,000 144,992 2.33%, 12/17/02 65,000 65,015 2.50%, 12/18/02 44,000 44,000 UNICREDITO ITALIANO SPA 2.42%, 01/16/02 10,000 10,000 2.25%, 01/28/02 55,000 55,000 2.54%, 01/31/02 17,000 17,000 2.11%, 02/04/02 350,000 350,000 2.12%, 02/05/02 110,000 110,000 1.92%, 02/11/02 35,000 35,001 WESTDEUTSCHE LANDESBANK GIROZENTRALE 1.90%, 02/12/02 280,000 280,000 2.30%, 02/20/02 57,000 57,000 2.07%, 02/26/02 70,000 70,000 3.30%, 03/04/02 15,000 15,003 1.90%, 03/11/02 100,000 100,000 1.81%, 03/26/02 50,000 50,000 1.82%, 03/26/02 20,000 20,000 WILMINGTON TRUST CO. 1.81%, 03/25/02 25,000 25,000 ---------- 16,955,599 PROMISSORY NOTES 1.3% - -------------------------------------------------------------------------------- o THE GOLDMAN SACHS GROUP, INC. 3.80%, 01/14/02 80,000 80,000 2.60%, 01/31/02 85,000 85,000 3.54%, 02/21/02 120,000 120,000 2.00%, 06/04/02 72,000 72,000 1.93%, 06/12/02 240,000 240,000 ---------- 597,000 BANK NOTES 1.3% - -------------------------------------------------------------------------------- BANK OF NEW YORK 4.50%, 03/28/02 25,000 24,999 4.27%, 04/30/02 141,000 140,996 LASALLE BANK, N.A. 2.08%, 02/06/02 123,000 123,000 4.50%, 03/28/02 25,000 24,999 WELLS FARGO BANK, N.A. 2.10%, 01/30/02 150,000 150,000 1.88%, 02/06/02 40,000 40,000 1.80%, 03/20/02 60,000 60,000 ---------- 563,994 VARIABLE-RATE OBLIGATIONS 2.2% of investments + ACTIVE LIVING OF GLENVIEW, L.L.C. Senior Floating Rate Note Series 1998, 144A 1.98%, 01/07/02 11,000 11,000 * BETA FINANCE, INC., 144A 1.88%, 01/15/02 143,000 142,996 + BMC SPECIAL CARE FACILITIES FINANCING AUTHORITY OF THE CITY OF MONTGOMERY, ALABAMA Taxable RB (Montgomery Baptist Outreach Services Corp. Project) Series 1997A 2.00%, 01/07/02 8,600 8,600 + CITY OF NEW BRITAIN, CONNECTICUT GO Pension Bonds 2.06%, 01/07/02 40,000 40,000 + CITY OF SANTA ROSA VRD Wastewater Series 1998A 2.00%, 01/07/02 17,300 17,300 + COLUMBUS, GEORGIA DEVELOPMENT AUTHORITY Taxable RB (Jay Leasing, Inc. Project) Series 1997 2.00%, 01/07/02 6,770 6,770 + FILLMORE, CALIFORNIA PUBLIC FINANCING AUTHORITY VRD Tax Allocation Bond (Fillmore Redevelopment Agency Central City Redevelopment Project Area) Series 1998A 2.06%, 01/07/02 10,120 10,120 o LEHMAN COMMERCIAL PAPER, INC., 144A 2.39%, 01/02/02 100,000 100,000 + LOANSTAR ASSETS PARTNERS II, L.P. 2.12%, 01/02/02 25,000 25,000 + MERLOT TRUST Series 2000B, 144A 2.08%, 01/07/02 30,000 30,000
See the Financial Notes, which are integral to this information. 51 SCHWAB VALUE ADVANTAGE MONEY FUND(R) -- FINANCIALS PORTFOLIO HOLDINGS Continued As of December 31, 2001.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ X 1,000) ($ X 1,000) o METROPOLITIAN LIFE INSURANCE CO., 144A 2.19%, 01/30/02 50,000 50,000 o MONUMENTAL LIFE INSURANCE CO., 144A 2.22%, 01/02/02 100,000 100,000 2.24%, 01/02/02 100,000 100,000 2.25%, 01/02/02 10,000 10,000 MORGAN STANLEY DEAN WITTER & CO., 144A 1.96%, 01/15/02 50,000 50,000 + NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY Taxable Economic Development Bonds (MSNBC CNBC Project) Series 1997A,144A 2.10%, 01/02/02 32,000 32,000 * SIGMA FINANCE, INC., 144A 1.93%, 01/25/02 35,000 35,002 +o STRATEGIC MONEY MARKET TRUST Series 2001M, 144A 1.90%, 03/13/02 15,000 15,000 + TOWN OF ISLIP, NEW YORK IDA Taxable Adjustable Rate IDRB (Nussdorf Associates/Quality King Distributors, Inc. Facility) Series 1992 2.08%, 01/07/02 3,905 3,905 o TRAVELERS INSURANCE CO 2.15%, 01/02/02 100,000 100,000 2.65%, 01/02/02 25,000 25,000 2.29%, 01/31/02 25,000 25,000 2.23%, 02/21/02 50,000 50,000 ---------- 987,693 FIXED-RATE - U.S. GOVERNMENT SECURITIES 1.4% of investments DISCOUNT NOTES 1.4% FANNIE MAE 2.00%, 01/31/02 10,908 10,890 2.01%, 01/31/02 130,000 129,783 2.02%, 01/31/02 125,447 125,237 FEDERAL HOME LOAN BANK 2.00%, 02/06/02 25,000 24,950 FREDDIE MAC 2.00%, 02/07/02 100,000 99,796 2.01%, 02/07/02 129,200 128,934 2.00%, 01/31/02 80,000 79,867 ---------- 599,457
OTHER INVESTMENTS 7.4% of investments MATURITY VALUE MKT. VALUE SECURITY ($ X 1,000) ($ X 1,000) REPURCHASE AGREEMENTS 7.4% BANK OF AMERICA SECURITIES, L.L.C. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities 1.84%, issued 12/31/01, due 01/02/02 35,004 35,000 CREDIT SUISSE FIRST BOSTON CORP Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities 1.82%, issued 12/31/01, due 01/02/02 252,886 252,860 2.08%, issued 10/31/01, due 01/07/02 200,786 200,000 J.P. MORGAN & CO. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities 1.82%, issued 12/31/01, due 01/02/02 600,061 600,000
See the Financial Notes, which are integral to this information. 52
MATURITY VALUE MKT. VALUE SECURITY ($ X 1,000) ($ X 1,000) UBS PAINEWEBBER, INC. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities 1.82%, issued 12/31/01, due 01/02/02 1,180,119 1,180,000 1.75%, issued 12/11/01, due 01/07/02 400,525 400,000 1.87%, issued 11/07/01, due 01/07/02 376,188 375,000 1.87%, issued 11/08/01, due 01/07/02 250,779 250,000 ---------- 3,292,860
- -------------------------------------------------------------------------------- END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for this fund. See the Financial Notes, which are integral to this information. 53 SCHWAB VALUE ADVANTAGE MONEY FUND(R) -- FINANCIALS Statement of ASSETS AND LIABILITIES As of December 31, 2001. All numbers x 1,000 except NAV. ASSETS - -------------------------------------------------------------------------------- Investments, at market value $44,306,371 a Receivables: Fund shares sold 176,616 Interest 162,450 Prepaid expenses + 229 ------------- TOTAL ASSETS 44,645,666 LIABILITIES - -------------------------------------------------------------------------------- Payables: Fund shares redeemed 285,277 Dividends to shareholders 10,089 Investments bought 98,000 Investment adviser and administrator fees 1,664 Transfer agent and shareholder service fees 791 Accrued expenses + 2,785 ------------- TOTAL LIABILITIES 398,606 NET ASSETS - -------------------------------------------------------------------------------- TOTAL ASSETS 44,645,666 TOTAL LIABILITIES - 398,606 ------------ NET ASSETS $44,247,060 NET ASSETS BY SOURCE Capital received from investors 44,247,164 Net realized capital losses (104)
NET ASSET VALUE (NAV) SHARES NET ASSETS / OUTSTANDING = NAV $44,247,060 44,247,273 $1.00 a Includes illiquid restricted securities worth $1,485,592, or 3.35% of the fund's investments. The amortized cost for the fund's securities was $44,306,371. FEDERAL TAX DATA - -------------------------------------------------------------------------------- COST BASIS OF PORTFOLIO $44,306,371 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2003 $104
See the Financial Notes, which are integral to this information. 54 Statement of OPERATIONS For January 1, 2001 through December 31, 2001. All numbers x 1,000. INVESTMENT INCOME Interest $1,932,775 NET REALIZED GAINS - -------------------------------------------------------------------------------- Net realized gains on investments sold 21 EXPENSES - -------------------------------------------------------------------------------- Investment adviser and administrator fees 139,599 a Transfer agent and shareholder service fees 103,042 b Trustees' fees 125 c Custodian and portfolio accounting fees 3,269 Professional fees 164 Registration fees 2,908 Shareholder reports 604 Other expenses + 170 ----------- Total expenses 249,881 Expense reduction - 58,666 d ----------- NET EXPENSES 191,215 INCREASE IN NET ASSETS FROM OPERATIONS - -------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 1,932,775 NET EXPENSES - 191,215 ----------- NET INVESTMENT INCOME 1,741,560 NET REALIZED GAINS + 21 ----------- INCREASE IN NET ASSETS FROM OPERATIONS $1,741,581
a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. Prior to June 1, 2001, these percentages were 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion and 0.30% over $20 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.05% of the fund's assets; for shareholder services, 0.17% of the fund's assets. Prior to June 1, 2001, the percentage for shareholder services was 0.20%. c For the fund's independent trustees only. d This reduction was made by the investment adviser (CSIM). It reflects a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the operating expenses of this fund through at least April 30, 2002 to 0.45% of average daily net assets. Prior to June 1, 2001, this limit was voluntarily further reduced to 0.40%. This limit doesn't include interest, taxes and certain non-routine expenses. See the Financial Notes, which are integral to this information. 55 SCHWAB VALUE ADVANTAGE MONEY FUND(R) -- FINANCIALS Statements of CHANGES IN NET ASSETS For the current and prior reporting periods. All numbers x 1,000.
- -------------------------------------------------------------------------------- OPERATIONS 1/1/01 - 12/31/01 1/1/00 - 12/31/00 Net investment income $ 1,741,560 $ 1,937,341 Net realized gains + 21 -- -------------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 1,741,581 1,937,341 DISTRIBUTIONS PAID - -------------------------------------------------------------------------------- Dividends from net investment income $ 1,741,560 $ 1,937,341 TRANSACTIONS IN FUND SHARES a - -------------------------------------------------------------------------------- Shares sold 52,214,557 53,581,784 Shares reinvested 1,633,497 1,810,657 Shares redeemed +(45,920,355) (46,338,286) -------------------------------------- NET INCREASE 7,927,699 9,054,155 NET ASSETS - -------------------------------------------------------------------------------- Beginning of period 36,319,340 27,265,185 Total increase + 7,927,720 9,054,155 b -------------------------------------- END OF PERIOD $44,247,060 $ 36,319,340
a Because all transactions in this section took place at $1.00 a share, figures for share quantities are the same as for dollars. b Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. See the Financial Notes, which are integral to this information. 56 FINANCIAL NOTES FINANCIAL NOTES BUSINESS STRUCTURE OF THE FUNDS EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF THE CHARLES SCHWAB FAMILY OF FUNDS,(TM) A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended. The sidebar shows the funds in this report and their trust. THE FUNDS' SHARES ARE BOUGHT AND SOLD AT $1.00 PER SHARE. Each share has a par value of 1/1,000 of a cent, and the trust may issue as many shares as necessary. FUND OPERATIONS Most of the funds' investments are described in the fund-by-fund sections earlier in this report. However, there are certain other investments and policies that may affect a fund's financials. The most significant of these are described below. Other policies concerning the funds' business operations also are described here. THE FUNDS DECLARE DIVIDENDS EVERY DAY THEY ARE OPEN FOR BUSINESS. These dividends, which are equal to a fund's net investment income for that day, are paid out to shareholders once a month. The funds may make distributions from any net realized capital gains once a year. THE FUNDS MAY BUY SECURITIES ON A DELAYED-DELIVERY BASIS. In these transactions, a fund agrees to buy a security for a stated price, with settlement generally occurring within two weeks. If the security's value falls before settlement occurs, a fund could end up paying more for the security than its market value at the time of settlement. The funds have set aside sufficient securities as collateral for those securities bought on a delayed-delivery basis. THE FUNDS MAY ENTER INTO REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security from another party (usually a financial institution) with the agreement that it be sold back in the future. The date, price and other conditions are all specified when the agreement is created. Any repurchase agreements with due dates later than seven days from issue dates may be subject to seven day put features for liquidity purposes. The funds' repurchase agreements will be fully collateralized by U.S. government securities. All collateral is held by the funds' custodian (or, with tri-party agreements, the agent's bank) and is monitored daily to ensure that its market value is at least equal to the repurchase price under the agreement. - -------------------------------------------------------------------------------- THE TRUST AND ITS FUNDS This list shows all of the funds included in The Charles Schwab Family of Funds. The funds discussed in this report are highlighted. THE CHARLES SCHWAB FAMILY OF FUNDS Organized October 20, 1989 Schwab Money Market Fund Schwab Government Money Fund Schwab U.S. Treasury Money Fund Schwab Value Advantage Money Fund(R) Schwab Municipal Money Fund Schwab California Municipal Money Fund Schwab New York Municipal Money Fund Schwab New Jersey Municipal Money Fund Schwab Pennsylvania Municipal Money Fund Schwab Florida Municipal Money Fund Schwab Institutional Advantage Money Fund(R) Schwab Retirement Money Fund(R) Schwab Government Cash Reserves - -------------------------------------------------------------------------------- 57 FINANCIAL NOTES THE FUNDS PAY FEES FOR VARIOUS SERVICES. Through their trust, the funds have agreements with Charles Schwab Investment Management, Inc. (CSIM) to provide investment advisory and administrative services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent and shareholder services. Although these agreements specify certain fees for these services, CSIM and Schwab have made additional agreements with the funds that may limit the total expenses charged. The rates and limitations for these fees vary from fund to fund, and are described in each fund's Statement of Operations. TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/OR DIRECTORS OF THE INVESTMENT ADVISER OR SCHWAB. Federal securities law limits the percentage of such "interested persons" who may serve on a trust's board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these persons for their service as trustees, but it did pay non-interested persons (independent trustees), as noted in each fund's Statement of Operations. THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING AFFILIATES. The funds may make direct transactions with certain other SchwabFunds(R) when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and officers. THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR REGULATED INVESTMENT COMPANIES. Accordingly, the funds distribute substantially all of their net investment income and realized net capital gains (if any) to their respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax. ACCOUNTING POLICIES The following are the main policies the funds use in preparing their financial statements. THE FUNDS VALUE THEIR SECURITIES AT AMORTIZED COST, which approximates market value. SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the security is executed. INTEREST INCOME is recorded as it accrues. If a fund bought a debt security at a discount (that is, for less than its face value) or a premium (more than face value), it amortizes the discount or premium from the current date up to maturity. The fund then increases (in the case of discounts) or reduces (in the case of premiums) the income it records from the security. If the security is callable (meaning that the issuer has the option to pay it off before its maturity date), then the fund amortizes the premium to the security's call date and price, rather than the maturity date and price. REALIZED GAINS AND LOSSES from security transactions are based on the identified costs of the securities involved. EXPENSES that are specific to a fund are charged directly to that fund. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their net assets. EACH FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND ACCOUNTING, and is considered a separate entity for tax purposes. Within its account, each fund also keeps certain assets in segregated accounts, as may be required by securities law. 58 THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It's possible that once the results are known, they may turn out to be different from these estimates. 59 REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF: Schwab Money Market Fund Schwab Government Money Fund Schwab U.S. Treasury Money Fund Schwab Value Advantage Money Fund(R) In our opinion, the accompanying statements of assets and liabilities, including the Portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schwab Money Market Fund, Schwab Government Money Fund, Schwab U.S. Treasury Money Fund and Schwab Value Advantage Money Fund (four of the portfolios constituting The Charles Schwab Family of Funds, hereafter referred to as the "Funds") at December 31, 2001, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP San Francisco, CA February 8, 2002 60 FUND TRUSTEES (UNAUDITED) A fund's Board of Trustees is responsible for protecting the interests of that fund's shareholders. The tables below give information about the people who serve as trustees and officers for the SchwabFunds(R), including the funds covered in this report. Under the Investment Company Act of 1940, any officer, director, or employee of Schwab or CSIM is considered an "interested person," meaning that he or she is considered to have a business interest in Schwab or CSIM. These individuals are the "interested trustees" listed in the first table. The "independent trustees" in the third table are individuals who, under the 1940 Act, are not considered to have a business interest in Schwab or CSIM. Each of the SchwabFunds (of which there were 44 as of 12/31/01) belongs to one of these trusts: The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently all these trusts have the same trustees and officers. The address for all trustees and officers is 101 Montgomery Street, San Francisco, CA 94104. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 800-435-4000. INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S); NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS - ---------------------------------------------------------------------------------------------------------------------------- CHARLES R. SCHWAB Chair. Trustee: Chair, Co-CEO, Director, The Charles Schwab Corp.; CEO, Director, 7/29/37 Family of Funds, 1989; Schwab Holdings, Inc.; Chair, Director, Charles Schwab & Co., Inc., Investments, 1991; Charles Schwab Investment Management, Inc.; Chair, Schwab Retirement Capital Trust, 1993; Plan Services, Inc.; until 7/01 Director, The Charles Schwab Trust Co.; Annuity Portfolios, Director, U.S. Trust Corp.; until 1/99, Chair, Director, Mayer & 1994. Schweitzer, Inc. (securities brokerage subsidiary of The Charles Schwab Corp.); Director, The Gap, Inc. (clothing retailer), Audiobase, Inc. (Internet audio solutions), Vodafone AirTouch PLC (telecom), Siebel Systems (software), Xign, Inc. (electronic payment systems). - ---------------------------------------------------------------------------------------------------------------------------- JOHN P. COGHLAN President, CEO. Vice Chair, EVP, The Charles Schwab Corp.; Vice Chair, 5/6/51 Trustee: 2000 Enterprise President, Retirement Plan Services, Services for (all trusts). Investment Managers, Charles Schwab & Co., Inc.; CEO, Director, Charles Schwab Investment Management, Inc.; President, CEO, Director, The Charles Schwab Trust Co.; President, Director, Schwab Retirement Technologies, Inc.; Director, Charles Schwab Asset Management (Ireland) Ltd., Charles Schwab Worldwide Funds PLC, Performance Technologies, Inc., Schwab Retirement Plan Services, Inc. - ---------------------------------------------------------------------------------------------------------------------------- JEREMIAH H. CHAFKIN EVP, COO. Trustee: EVP, Asset Management Products and Services, Charles Schwab & 5/9/59 2000 (all trusts). Co., Inc.; President, COO, Charles Schwab Investment Management, Inc.; Director, Charles Schwab Asset Management (Ireland) Ltd., Charles Schwab Worldwide Funds PLC; until 9/99, Senior Managing Director, Bankers Trust Co.
61 INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS - ------------------------------------------------------------------------------------------------------------------------ TAI-CHIN TUNG Treasurer, Principal SVP, CFO, Charles Schwab Investment Management, Inc.; VP, The 3/7/51 Financial Officer. Charles Schwab Trust Co.; 1994-96, Controller, Robertson Stephens Investment Management, Inc. - ------------------------------------------------------------------------------------------------------------------------ STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Charles Schwab Investment 4/5/55 Officer. Management, Inc.; Chief Investment Officer, The Charles Schwab Trust Co. - ------------------------------------------------------------------------------------------------------------------------ KOJI E. FELTON Secretary. SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab 3/13/61 Investment Management, Inc.; until 6/98, San Francisco Branch Chief in Enforcement, U.S. Securities and Exchange Commission.
INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS - ------------------------------------------------------------------------------------------------------------------------- DONALD DORWARD Family of Funds, 1989; CEO, Dorward & Associates (management, marketing, marketing 9/23/31 Investments, 1991; consulting); 1996-99, EVP, Managing Director, Grey Advertising. Capital Trust, 1993; Annuity Portfolios, 1994. - ------------------------------------------------------------------------------------------------------------------------- ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international financial 5/15/31 Investments, 1991; services and investment advisory firm.). Capital Trust, 1993; Annuity Portfolios, 1994. - ------------------------------------------------------------------------------------------------------------------------- DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments); until 1996, 6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investment). Capital Trust, 1993; Annuity Portfolios, 1994. - ------------------------------------------------------------------------------------------------------------------------- MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate and 8/18/43 Investments, 1991; investments). Capital Trust, 1993; Annuity Portfolios, 1994. - ------------------------------------------------------------------------------------------------------------------------- MARIANN BYERWALTER 2000 (all trusts). Special Advisor to the President, Stanford University; 8/13/60 1996-2000 VP, Business Affairs, CFO, Stanford University; until 2/96, CFO, Eureka Bank; CFO, COO, America First Eureka Holdings, Inc. (holding company); Director, America First Cos., (venture capital/fund management), Redwood Trust, Inc. (mortgage finance), Stanford Hospitals and Clinics, SRI International (research), LookSmart, Ltd. (internet infra- structure), PMI Group, Inc. (mortgage insurance), Lucile Packard Children's Hospital.
62 INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES CONTINUED
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS - ------------------------------------------------------------------------------------------------------------------------- WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp (bio-pharmaceuticals); until 8/98, Dean, Haas 11/22/41 School of Business, University of California, Berkeley; Director, Solectron Corp. (manufacturing), Tenera, Inc. (services and software), Airlease Ltd. (aircraft leasing), Mission West Properties (commercial real estate), Digital Microwave Corp. (network equipment). - ------------------------------------------------------------------------------------------------------------------------- GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors); 9/28/50 Director, Pennzoil-Quaker State Co. (oil and gas), Rorento N.V. (investments--Netherlands), Cooper Industries (electrical products); Member, audit committee, Northern Border Partners, L.P., (energy).
63 HOW TO READ THIS REPORT This report, including the financial tables, has been designed to be EASY TO READ. The next few pages provide additional information that can help you more fully understand the financial tables and why they are important to ALL FUND INVESTORS. In this section, we take a closer look at the types of information presented in the financial tables. Brief CALLOUTS add context to some of the most important elements in the tables, and help explain certain fund operations and accounting principles. At the end, a GLOSSARY defines many of the financial terms that are used in this report. [GRAPHIC OF SAMPLE OF FINANCIAL HIGHLIGHTS] Table is for illustration only. The financial highlights summarize the fund's activities over the past five years (or since inception, if the fund doesn't yet have five years of operat- ing history). The figures in the first part of the table are for a single share of the fund that was "outstanding," or in existence, during the periods indicated. These lines show how much the fund earned per share, and where these earnings came from: how much was from interest and dividends, and how much from capital appreciation (that is, price increases of investments the fund owned). A fund may show losses in this section if its expenses exceeded its income or its capital losses exceeded its capital gains. Some funds, such as money funds, typically receive all their earnings as interest, while some equity funds may have only appreciation, or may receive interest and dividends only occasionally. Total return shows what an investor in the fund would have earned or lost during each period indicated, assuming that all dividends and distributions were reinvested. Because the numbers in the financial highlights are for a fund's fiscal year, they will be different from calendar year numbers, except for funds whose fiscal year is the same as the calendar year. 64 [GRAPHIC OF SAMPLE OF FINANCIAL HIGHLIGHTS continued] Table is for illustration only. In some cases, such as with funds that started partway through their planned fiscal year or have changed their fiscal year, the financial highlights may contain a "stub period" that is less than 12 months. In financial tables, parentheses around numbers are used to indicate a negative number, such as a loss, or a number that is being subtracted, such as a distribution paid by a fund to its shareholders. The figures in this part of the table disclose a fund's annual operating expenses. The expenses are shown as a percentage of a fund's average net assets, because they are paid from these assets. For some funds, the annual expenses are capped at a certain level. With these funds, there are two sets of expense figures: net expenses and the amounts of any expense reductions. The net figures reflect what the expenses actually were, after the reductions. This shows you how much a fund netted in dividend and interest income (i.e., total dividends and interest minus expenses), expressed as a percentage of the fund's average net assets. 65 HOW TO READ THIS REPORT Continued [GRAPHIC OF SAMPLE OF PORTFOLIO HOLDINGS] Table is for illustration only. The Portfolio Holdings (sometimes also called the Schedule of Investments) is a snapshot of all securities a fund held on the last day of the reporting period. Symbols that may appear in the Portfolio Holdings: + Credit-enhanced security--indicates a security that is backed by the credit of a third party (usually a large financial institution). An issuer uses credit enhancement to give its securities a higher credit rating, which means that the issuer can pay a lower interest rate. From a fund's standpoint, credit enhancements can help lower the risk of default on those securities that carry them. o Illiquid restricted security--indicates a security whose resale is subject to legal or contractual restrictions, and has been determined to be illiquid. = Delayed-delivery security--indicates a security a fund has arranged to buy but has not yet received. A fund may incur a gain or loss if the value of the security rises or falls between the time the purchase was arranged and the time the security is delivered. For fixed-rate obligations, the interest rate is set at the time of issue and doesn't change. However, some types of obligations (variable- and floating-rate) are structured so that the rate may be reset at certain times, typically to reflect changes in market interest rates. A fund may own some of both types of securities. This shows a breakdown of holdings by asset type. To the right of the pie chart are figures showing the total market value of securities of each asset type, and also the amortized cost for those securities. 66 [GRAPHIC OF SAMPLE OF PORTFOLIO HOLDINGS Continued] Table is for illustration only. Unlike longer term bonds, money market securities have characteristics (i.e. shorter maturities) that allow their market value to be less sensitive to changes in interest rates or other market factors. Thus, with most money market securities, face value and market value are substantially equal. In some cases, securities are organized into sub-groups. For each sub-group, there are figures showing the percentage of investments represented and the total market value of the securities in the subgroup. Note that for all dollar values, you need to add three zeroes after each number to get the approximate value. 67 HOW TO READ THIS REPORT Continued [GRAPHIC OF SAMPLE OF STATEMENT OF ASSETS AND LIABILITIES] Table is for illustration only. As with the Portfolio Holdings, the figures in these statements need to be multiplied by 1,000. This includes the figures in the notes. The Statement of Assets and Liabilities is a snapshot of a fund's balance sheet on the last day of the reporting period. At any given time, a fund is likely to be owed money from various sources that it has not yet received, and to owe money it hasn't yet paid. This section gathers the totals from the first two sections in order to compute net assets. This section shows where the assets described above came from. "Capital received from investors" is money a fund received from investors buying its shares during the reporting period, and is a net figure (meaning that money the fund remitted to investors who redeemed their shares has already been subtracted from it). [GRAPHIC OF SAMPLE OF FEDERAL TAX DATA] Table is for illustration only. Although a mutual fund doesn't expect to pay federal income tax, it does have to file a return with the IRS. In some cases, the requirements of tax accounting differ from the requirements of the accounting practices used in keeping a fund's books, so the figures in this box may differ from those shown elsewhere in the financials. These differences may require that some values be reclassified in the financials, but this does not affect a fund's NAV. 68 [GRAPHIC OF SAMPLE OF STATEMENT OF OPERATIONS] Table is for illustration only. The Statement of Operations tells you how much money a fund earned and spent over the course of the reporting period, and how much it gained and lost on its investments. These are the capital gains or losses resulting from securities a fund sold during the reporting period. To safeguard the interests of shareholders, mutual funds must keep their portfolio securities in accounts at a financial institution, whose tasks include maintaining records of a fund's holdings. Covers most activities related to managing a fund's portfolio. Covers most activities associated with shareholders, including processing transactions in fund shares and providing services such as account statements and information. This section gathers the totals from the first four sections in order to com- pute the net earnings or losses that resulted from a fund's operations during the reporting period. These figures also appear, in summary form, on the Statements of Changes in Net Assets. 69 HOW TO READ THIS REPORT Continued [GRAPHIC OF SAMPLE OF STATEMENTS OF CHANGES IN NET ASSETS] Table is for illustration only. The Statements of Changes in Net Assets compare a fund's performance during the current reporting period with its performance from the previous report period. Keep in mind that if the current report is a semiannual report, its figures are only for six months, whereas the figures for the previous period are generally for a full year. From this section, you can see how the size of a fund was affected by investors buying and selling shares (as opposed to changes due to fund performance, shown above in "Operations"). The information shows how many shares the fund sold to investors, how many shares the fund issued in connection with investors who reinvested their divi- dends or distributions, and how many shares the fund redeemed (bought back from investors). In funds with more than one share class, these figures are reported by class. These are the figures for the current reporting period. These are the figures for the previous reporting period. 70 GLOSSARY ALTERNATIVE MINIMUM TAX (AMT) A federal income tax designed to limit the extent to which high-income taxpayers (including individuals, estates, trusts and corporations) can benefit from certain deductions and exemptions. For example, some types of income that are exempt from regular federal income tax are not exempt from the AMT. ASSET ALLOCATION The practice of dividing a portfolio among different asset classes, with each asset class assigned a particular percentage. ASSET-BACKED SECURITIES Securities that are backed by the loans or accounts receivable of an entity, such as a bank or credit card company. These securities are obligations that the issuer intends to repay using the assets backing them (once collected). Therefore, repayment depends largely on the cash flows generated by the assets backing the securities. ASSET CLASS A group of securities with similar structure and basic characteristics. Stocks, bonds and cash are the three main examples of asset classes. BOND A security representing a loan from the investor to the issuer. A bond typically pays interest at a fixed rate (the "coupon rate") until a specified date (the "maturity date"), at which time the issuer returns the money bor- rowed ("principal" or "face value") to the bondholder. Because of their structure, bonds are sometimes called "fixed income securities" or "debt securities." BOND ANTICIPATION NOTES Obligations sold by a municipality on an interim basis in anticipation of the municipality's issuance of a longer-term bond in the future. CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still "on paper" and is considered unrealized. COMMERCIAL PAPER Promissory notes issued by banks, corporations and other institutions to finance short-term credit needs. These securities generally are structured as discount notes but sometimes may be interest-bearing notes. Commercial paper, which may be unsecured, is subject to credit risk. CREDIT QUALITY The capacity of an issuer to make its interest and principal payments. Federal regulations strictly limit the credit quality of the securities a money market fund can buy. CREDIT RATINGS Debt issuers, including corporations, states and municipalities, may arrange with a recognized independent rating organization, such as Moody's Investor Service, Standard & Poor's and Fitch, Inc., to rate their creditworthiness and/or the creditworthiness of their debt issues. For example, an issuer may obtain a long-term rating within the investment grade rating category, which is from high to low, AAA, AA, A and BBB for Standard & Poor's and Fitch, and Aaa, Aa, A and Baa for Moody's. CREDIT RISK The risk that a debt issuer may be unable to pay interest or principal to its debtholders. - ----------------------------------------------------------------------------- PORTFOLIO TERMS To help reduce the space occupied by the portfolio holdings, we use the following terms. Most of them appear within descriptions of individual securities in municipal funds, and describe features of the issuer or the security. Some of these are more fully defined elsewhere in the Glossary. ACES Adjustable convertible extendable security BAN Bond anticipation note COP Certificate of participation GAN Grant anticipation note GO General obligation HDA Housing Development Authority HFA Housing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDRB Industrial Development Revenue Bond M/F Multi-family RAN Revenue anticipation note RB Revenue bond S/F Single-family TAN Tax anticipation note TECP Tax-exempt commercial paper TOB Tender option bond TOBP Tender option bond partnership TRAN Tax and revenue anticipation note VRD Variable-rate demand - ----------------------------------------------------------------------------- 71 GLOSSARY Continued DOLLAR-WEIGHTED AVERAGE MATURITY (DWAM) See weighted average maturity. EFFECTIVE YIELD A measurement of a fund's yield that assumes that all dividends were reinvested in additional shares of the fund. EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to cover the fund's operating expenses. An expense ratio of 0.50% means that a fund's expenses amount to half of one percent of its average net assets a year. FACE VALUE The value of a bond, note, mortgage or other security as given on the certificate or instrument. Face value is also referred to as par value or nominal value. INTEREST Payments to holders of debt securities as compensation for loaning a security's principal to the issuer. MATURITY Generally, the date a debt security is scheduled to be "retired" and its principal amount returned to the bondholder. MONEY MARKET SECURITIES High-quality, short-term debt securities that may be issued by entities such as the U.S. government, corporations and financial institutions (such as banks). Money market securities include commercial paper, promissory notes, certificates of deposit, banker's acceptances, notes and time deposits. MUNICIPAL SECURITIES Debt securities issued by a state, its counties, municipalities, authorities and other subdivisions, or the territories and possessions of the United States and the District of Columbia, including their subdivisions, agencies and instrumentalities and corporations. These securities may be issued to obtain money for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, public utilities, schools, streets, and water and sewer works. NET ASSET VALUE PER SHARE (NAV) The value of one share of a mutual fund. NAV is calculated by taking the fund's total assets, subtracting liabilities, and dividing by the number of shares outstanding. Money funds seek to maintain a steady NAV of $1.00 OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual fund, indicates all shares currently held by investors. REVENUE ANTICIPATION NOTES Obligations that are issued in expectation of the receipt of other types of revenue, such as that available under the Federal Revenue Sharing Program. TAXABLE-EQUIVALENT YIELD The yield an investor would need to get from a taxable investment in order to match the yield paid by a given tax-exempt investment, once the effect of all applicable taxes is taken into account. For example, if your tax rate were 25%, a tax-exempt investment paying 4.5% would have a taxable-equivalent yield for you of 6.0% (4.5% / [1 - 0.25%] = 6.0%). TOTAL RETURN The overall performance of an investment over a given period, including any expenses, any income or distributions paid out and any capital gain or loss (increases or decreases in portfolio value). TAX ANTICIPATION NOTES Notes that typically are sold to finance the working capital needs of municipalities in anticipation of the receipt of property taxes on a future date. WEIGHTED AVERAGE For mutual funds, an average that gives the same weight to each security as the security represents in the fund's portfolio. WEIGHTED AVERAGE MATURITY For mutual funds, the maturity of all the debt securities in its portfolio, calculated as a weighted average. As a rule, the longer a fund's weighted average maturity, the greater its interest rate risk. Money funds are required to maintain a weighted average maturity of no more than 90 days. YIELD The income paid out by an investment, expressed as an annual rate and calculated as a percentage of the investment's market value. 72 CONTACT SCHWAB The SchwabFunds(R) Family includes a variety of funds to help meet your investment needs. You can diversify your portfolio in a single step with our asset allocation funds. Or you can customize your portfolio with a combination of our stock funds as well as our taxable and tax-advantaged bond and money market funds. Please call 800-435-4000 for a free prospectus and brochure for any of these SchwabFunds. This report must be preceded or accompanied by a current prospectus. METHODS FOR PLACING ORDERS The following information outlines how Schwab brokerage account investors can place orders. If you are investing through a third-party investment provider, methods for placing orders may be different. INTERNET 1 www.schwab.com SCHWAB BY PHONE(TM) Use our automated voice service or speak to a representative. Call 800-435-4000, day or night (for TDD service, call 800-345-2550). TELEBROKER(R) Automated touch-tone phone service at 800-272-4922 MAIL Write to SchwabFunds at: PO Box 7575 San Francisco, CA 94120-7575 When selling or exchanging shares, be sure to include the signatures of at least one of the persons whose name is on the account. 1 Shares of Sweep Investments(TM) may not be purchased over the Internet. THE SCHWABFUNDS FAMILY STOCK FUNDS Schwab S&P 500 Fund Schwab 1000 Fund(R) Schwab Small-Cap Index Fund(R) Schwab Total Stock Market Index Fund(R) Schwab International Index Fund(R) Schwab Analytics Fund(R) Schwab Focus Funds Communications Focus Fund Financial Services Focus Fund Health Care Focus Fund Technology Focus Fund Schwab MarketManager Portfolios(R) Small Cap Portfolio International Portfolio ASSET ALLOCATION FUNDS Schwab MarketTrack Portfolios(R) All Equity Portfolio Growth Portfolio Balanced Portfolio Conservative Portfolio Schwab MarketManager Portfolios Growth Portfolio Balanced Portfolio BOND FUNDS Schwab Short-Term Bond Market Index Fund Schwab Total Bond Market Index Fund Schwab YieldPlus Fund(R) Schwab Short/Intermediate Tax-Free Bond Fund Schwab Long-Term Tax-Free Bond Fund Schwab California Short/Intermediate Tax-Free Bond Fund Schwab California Long-Term Tax-Free Bond Fund SCHWAB MONEY FUNDS Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity. 2 Choose from taxable or tax-advantaged alternatives. Many can be linked to your Schwab account to "sweep" cash balances automatically when you're between investments. Or, for your larger cash reserves, choose one of our Value Advantage Investments.(R) 2 Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and, although they seek to preserve the value of your investment at $1 per share, it is possible to lose money. [CHARLES SCHWAB LOGO] INVESTMENT ADVISER Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR Charles Schwab & Co., Inc. PO Box 7575, San Francisco, CA 94120-7575 This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. (C)2002 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. Printed on recycled paper. REG13857-04 -----END PRIVACY-ENHANCED MESSAGE-----